U.S. November single-family home construction rebounds, policy uncertainty may become a new obstacle

According to the Zhitong Finance APP, a report released by the U.S. Department of Commerce on Wednesday shows that as the impact of hurricanes gradually weakens, single-family home construction in the U.S. rebounded in November. However, the threat of import tariffs and potential labor shortages caused by large-scale immigrant deportations may put pressure on new home construction next year. Data shows that single-family home construction permits in November saw only a slight increase, indicating that residential investment may have a limited contribution to economic growth in the fourth quarter. Despite the Federal Reserve's continued interest rate cuts, high mortgage rates remain a significant constraint on the real estate market. The tariff policies promised by Trump and the plan for deporting undocumented immigrants are believed to exacerbate this issue. Single-family home starts account for the vast majority of overall residential construction, increasing by 6.4% in November, with a seasonally adjusted annual rate reaching 1.011 million units. Residential construction has faced challenges for most of this year, primarily due to a severe shortage of existing home supply. Although the Federal Reserve has cut rates continuously since September, the yield on 10-year U.S. Treasury bonds has risen due to economic resilience and concerns that new government policies may trigger inflation, with the 30-year fixed mortgage rate still close to 7%. JPMorgan economist Abiel Reinhart stated, "Our U.S. Treasury strategists expect the 10-year yield to decline by only about 15 basis points by the end of next year, indicating limited room for mortgage rates to fall. At the same time, a reduction in immigration may suppress household growth and further impact the labor supply in the construction industry." The Federal Reserve announced its third consecutive rate cut on Wednesday but is expected to cut rates only twice next year, rather than the four times predicted in September. This decision reflects the ongoing resilience of the economy. However, some economists are concerned that certain policies of the Trump administration may drive up inflation. Capital Economics North America economist Bradley Saunders stated, "We have a relatively pessimistic outlook, expecting Trump's trade and immigration policies to weaken the supply capacity of home builders." Due to the impact of hurricanes Helen and Milton, single-family home construction in the southern U.S. significantly slowed in October but rebounded by 18.3% in November. However, single-family home construction in the Northeast, Midwest, and Western regions continued to decline. Year-on-year, single-family home construction decreased by 10.2%. Multi-family housing starts plummeted by 24.1%, falling to an annualized rate of 264,000 units, the lowest level since March. Overall residential starts declined by 1.8%, to an annualized rate of 1.289 million units, a year-on-year decrease of 14.6%. In November, single-family home building permits increased by 0.1%, reaching an annualized rate of 972,000 units. Among them, permits in the southern region grew by 1.8%, while permits in the Northeast and Western regions declined, and the Midwest remained unchanged. Multi-family housing building permits surged by 22.1%, reaching an annualized rate of 481,000 units. Overall building permits increased by 6.1%, to an annualized rate of 1.505 million units, a slight year-on-year decrease of 0.2%. Residential investment has dragged down GDP growth for two consecutive quarters. The Atlanta Federal Reserve predicts that GDP will grow at an annualized rate of 3.2% in the fourth quarter, up from 2.8% in the third quarter In November, the number of single-family homes under construction increased by 0.7% to 144,000 units. The completion rate for this category rose by 3.3%, reaching an annualized rate of 1.038 million units. Overall residential completions fell by 1.9% to an annualized rate of 1.601 million units. The number of homes under construction decreased by 1.8% to an annualized rate of 1.434 million units, with single-family home inventory declining by 0.8% to 637,000 units, the lowest level since March 2021. A survey by the National Association of Home Builders showed that the builder confidence index remained at a seven-month high in December due to expectations of reduced regulation under the Trump administration. However, economists warn that if Trump implements his trade and immigration policies, lumber prices could rise further, and the labor shortage in the construction industry will worsen. The U.S. imports a large amount of lumber from Canada, which is a key raw material for residential construction. Trump has stated that he would impose a 25% tariff on all goods imported from Canada and Mexico. This year, the Biden administration has increased the import tariff on Canadian softwood products from 8.05% to 14.54%. "Much of the regulation of residential construction comes from state and local governments," said Nancy Vanden Houten, chief U.S. economist at Oxford Economics. "Foreign workers who are non-citizens make up about 18% of the construction workforce." In the future, whether U.S. residential construction can overcome its current challenges will largely depend on the comprehensive impact of policy changes on market supply and demand