U.S. Housing Heat Map Signals Ongoing Deceleration As Buyers Wait For Lower Rates

New residential housing construction momentum continued cooling in August, with permits under pressure nationally, particularly in the South and West. Builders are managing inventory tightly while awaiting further Federal Reserve interest rate cuts to hopefully revive demand, with Midwest markets standing out as relative outperformers. Many buyers remain sidelined by affordability woes, as elevated mortgage rates and high home prices crush demand, and a softening labor market now adds to the challenges. 

A team of Goldman analysts, led by Susan Maklari, penned a note on Tuesday that provides a heat map for the nation's housing market, showing that falling housing permits signal the real estate market shifted into a lower gear. Builders are more cautious in late year, buyers are waiting for the Fed Chair Powell to unleash another round of interest rate cuts, and home price growth has stalled. The Midwest is holding up, but the South and West markets are softening the fastest.