Graphic used to denote By the Numbers articles

More new homes being built despite higher mortgage rates

What factors are causing housing starts to rebound?

BySteve Wyett
June 23, 20236 min read

While not a massive part of the U.S. economy, the domestic housing market is an important economic barometer. In addition to the direct impact on employment and spending, housing activity and “household formation” impact a broad swath of economic sectors. At its base, owning a home is still a crucial part of the “American dream.”

Access to and the cost of financing are key variables influencing the housing market. Periods of higher unemployment or economic recessions mean access to credit can be more difficult, and periods of rising rates increase the cost of financing a house. So as the Federal Reserve began increasing interest rates in the face of higher inflation, it was not surprising to see housing starts dip. As we exited the pandemic, low interest rates decreased the cost of money, and with strong employment gains, we saw home prices rise rapidly. Inflation also increased the cost of building new homes, which led to price increases.

Recent reports have shown a surprising trend of housing starts rebounding even as home mortgage rates remain near 7% and publicly traded home builder stocks have rallied strongly this year. This might seem counter-intuitive, but looking under the hood of the U.S. housing market reveals why this is happening.

Looking long term, we can see housing starts never fully recovered from the financial crisis/housing bust of 2007-2009. One could understand the slow recovery, but it means we have been “underbuilding” housing even as our population expands. This chronic undersupply of new housing is one reason prices have not fallen as much as expected, given the huge upward move in mortgage rates.

Another reason for the improvement in starts and homebuilder stocks is the dearth of existing homes for sale. Bloomberg recently reported the number of homes for sale in the U.S. is at a record low. Why? Many homeowners took advantage of low mortgage rates available during the pandemic to refinance their homes, and home buyers during that period could finance their purchases at low rates; hence, selling a home now would mean financing a new purchase at today’s higher rates. This means current homeowners are reluctant to sell, reducing supply in the housing market. If existing homeowners are not selling, new construction is the only source of homes to buy. And although nationally home prices are down, recent data shows the demand for housing is still above its supply.

Disclosure

Download the full report

Get By the Numbers delivered to your inbox.

Subscribe (Opens in a new tab)

Related Content

    BOK Financial Corporation is a more than $50 billion regional financial services company headquartered in Tulsa, Oklahoma with more than $105 billion in assets under management and administration. The company's stock is publicly traded on NASDAQ under the Global Select market listings (BOKF). BOK Financial Corporation's holdings include BOKF, NA; BOK Financial Securities, Inc., and BOK Financial Private Wealth, Inc. BOKF, NA's holdings include TransFund and Cavanal Hill Investment Management, Inc. BOKF, NA operates banking divisions across eight states as: Bank of Albuquerque; Bank of Oklahoma; Bank of Texas and BOK Financial (in Arizona, Arkansas, Colorado, Kansas and Missouri); as well as having limited purpose offices Nebraska, Wisconsin, Connecticut and Tennessee. The entities held by BOK Financial Corporation are periodically referred to collectively as BOK Financial Corporation Group. Through its subsidiaries, BOK Financial Corporation provides commercial and consumer banking, brokerage trading, investment, trust services, mortgage origination and servicing, and an electronic funds transfer network. For more information, visit www.bokf.com.

    Securities, insurance, and advisory services offered through BOK Financial Securities, Inc., member FINRA/SIPC and an SEC registered investment adviser. Services may be offered under our trade name, BOK Financial Advisors.

    Investments involve risk, including loss of principal. Past performance does not guarantee future results. There is no assurance that the investment process will consistently lead to successful investing. Asset allocation and diversification do not eliminate the risk of experiencing investment losses. Risks applicable to any portfolio are those associated with its underlying securities.

    INVESTMENT AND INSURANCE PRODUCTS ARE: NOT FDIC INSURED | NOT GUARANTEED BY THE BANK OR ITS AFFILIATES | NOT DEPOSITS | NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY | MAY LOSE VALUE.

    The content in this article is for informational and educational purposes only and does not constitute legal, tax or investment advice. Always consult with a qualified financial professional, accountant or lawyer for legal, tax and investment advice. Neither BOK Financial Corporation nor its affiliates offer legal advice.

    BOK Financial® is a trademark of BOKF, NA. Member FDIC. Equal Housing Lender . © 2025 BOKF, NA.