For the second time in 2022, new home starts in the Oklahoma City region dropped precipitously in September, although the market has been particularly volatile this year, with its fair share of ups and downs.
According to Mortgage News Daily, mortgage rates reached 6.66 percent in early October in Freddie Mac’s routine assessment, but subsequently rose to seven percent – more than double what they were at their lowest in January 2021.
With fewer starts than in any October for at least ten years, October was unsettling for OKC area home builders as well. It was the second-slowest for new home starts of the 120 months during the previous 10 years.
For new homebuyers, higher rates equate to larger monthly mortgage payments. The good news for those who are still looking is that there are more options now that enough buyers have pulled out of the market, increasing the supply of available properties.
What’s Causing OKC’s New Construction to Slow?
According to Caleb McCaleb, McCaleb Homes’ owner, rising mortgage interest rates and general inflation have reduced demand, and persistent supply chain issues continue to obstruct the delivery of construction supplies, including a countrywide scarcity of electrical transformers for new, emerging areas.
According to Mike Means, executive vice president of the Oklahoma Home Builders Association, both Oklahoma Gas and Electric Co. and Public Service Co. of Oklahoma have experienced difficulties supplying transformers, and some neighborhoods still under construction have been at a standstill for weeks.
Means said that in an effort to convince the White House to hold a summit on the shortfall, which has been made worse by Hurricane Ian’s devastation of so much of Florida, the National Association of Home Builders and other building sector associations are now lobbying.
How Many Building Permits Were Issued in October?
According to Dharma Inc.’s Builder Report, just 244 permits for single-family homes were granted in Oklahoma City, unincorporated Oklahoma County, Bethany, Blanchard, Choctaw, Del City, Edmond, Midwest City, Moore, Mustang, Newcastle, Noble, Norman, Shawnee, Tuttle, Warr Acres, and Yukon last month.
It was a 65.8 percent decrease from the 713 permits granted in October of the previous year, which was the second most issued in OKC in any given month for more than 100 years. The only other time it was higher was August 2013 when 725 permits were handed out.
From the 332 permits granted in September, there was a decrease of 26.5 percent month-over-month.
4,716 permits were granted until Halloween this year, compared to 5,535 permits issued through October 2021, a 14.8 percent decrease year to date.
What Other Factors Are Impacting OKC’s Home Construction?
McCaleb says the main causes of this sharp decline in new house starts statewide and in OKC are, firstly, caused by higher buyer interest rates. Additionally, higher costs of homes as a result of labor and material shortages and, finally, builders’ worries that a recession is imminent.
Means said that rising borrowing rates and inflation had “put a dent in ability to buy.” Mortgage interest rates haven’t been as low in a very long time. Many customers who were eligible at three percent are no longer eligible to acquire what they desired. As a result, several sales fail to make it to fruition.
In contrast to sales of previously owned and occupied houses, Means points out that if individuals are unable to sell their current residence, they simply cannot construct their ideal home.
Realtor-sold house sales are declining too. It’s difficult to pinpoint the precise impact of the development slowdown on overall inventory since new houses sold directly by builders don’t appear in those statistics, unless Realtors are acting on behalf of a buyer.
Whatever the precise outcome, abrupt market shifts pose difficulties for both buyers and sellers for the foreseeable future.
