As the number of new construction permits dropped to a historic low last month (the lowest since 2020), Don Peebles, Chair and Chief Executive Officer at Peebles Corporation, warns of a “double blow” to the market, making housing unaffordable for an average American.
He also welcomes Florida’s initiative that tries to rectify this situation. He calls the absence and reduction of demand a “double blow” because buyers and consumers can no longer afford what they could purchase last year, as the property price does not match the market value. Meanwhile, credit markets are essentially unwilling to finance development.
Mr. Peebles’ comments are particularly relevant now that the volume of new housing construction in the USA dropped again in November, as high mortgage rates, combined with the universal inflation, continued to cool the demand and the once-overheated housing market.
Recent data from the Department of Commerce published this Tuesday shows that last month, housing construction reduced by 0.5%, down to 1.427 million units per year. The number of applications for construction, which is used to measure the future supply in the market, dropped to 1.34 million per year – 11.2% fewer than in October. The number of construction permits for single-family houses, which account for the majority of residential construction, also reduced by 7.1%, to a historic low since May 2020.
Mr. Peebles believes that high interest rates are forcing most people out of the market or reducing their buying capacity to a product they are unwilling to buy and this is likely to continue.
Last Friday, Florida Governor Ron DeSantis (a Republican) adopted a law designed to improve the state’s problematic property insurance system. This bill creates a reinsurance fund of $1 billion, reduces legal expenses, and makes some clients leave the state-funded insurance company.
Florida has been doing everything in its power to keep its insurance market stable since 1992, when Hurricane Andrew laid waste to Homestead and bankrupted several insurance firms, so many of the remaining companies were wary of issuing or extending their insurance policies in this state. Homeowners’ risks are also growing, as the climate change makes hurricanes and torrential rains stronger.
Something definitely needs to be done with the uncontrollable insurance costs, yet homeowners are taking huge risks when they insure in Florida or California, where forest fires rage, Mr. Peebles believes. Steps taken by Governor DeSantis are intended to help an average person afford their own home.
The real estate expert declared that Florida had no other choice but to intervene. The high insurance premiums will, however, prevent many people from moving to this state. People cannot relocate to Florida unless they can afford to purchase a home and insure it. Consumers are severely affected, so the state administration had no choice but to help the taxpayers. Mr. Peebles thinks it was a smart move and encourages other states to follow Florida’s example. He predicts that housing construction will revive as soon as inflation is under control.