By Lucia Mutikani
Reuters

WASHINGTON (Reuters) – U.S. construction spending edged up in May despite the Middle East conflict constraining homebuilding.

The Commerce Department’s Census Bureau reported that construction spending rose 0.1% after a downwardly revised 0.3 percent increase in April. Economists polled by Reuters had forecast construction spending gaining 0.1 percent after a previously reported 0.4% increase in April.

Construction spending fell 1.5 percent on a year-over-year basis in May. Spending on private construction projects was unchanged after rising 0.3% in the prior month. Investment in residential construction increased 0.3 percent, reflecting renovations.

Spending on new single-family housing projects dropped 0.1 percent. It tumbled 4.0 percent year-on-year in May.

The U.S.-Israeli war with Iran boosted oil prices, driving up inflation and mortgage rates. The average rate on the popular 30-year fixed-rate mortgage has increased by about 50 basis points since the conflict started at the end of February, data from mortgage finance agency Freddie Mac showed.

Spending on multi-family housing units, which account for a small share of the housing market, dipped 0.1 percent in May.

Investment in private nonresidential structures such as power plants and factories declined 0.3 percent in May. Spending on factory construction dropped 1.3 percent, while outlays on power plants eased 0.1 percent, despite a surge in the construction of data centers to support artificial intelligence.

Investment in public construction projects increased 0.5 percent after a similar gain in April. State and local government construction spending rose 0.4 percent in May while outlays on federal government projects jumped 1.3 percent, likely boosted by the building of detention centers as part of an immigration crackdown.

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The average rate for a 30-year U.S. mortgage edged higher for the third week in a row, though it remains close to its low point in 2025.

The average long-term mortgage rate ticked up to 6.26 percent last week from 6.24 percent the week before, mortgage buyer Freddie Mac stated. A year ago, the rate averaged 6.84 percent.

Four weeks ago, the average rate was at 6.17 percent — the lowest level in more than a year.

Borrowing costs for 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also inched up last week. The rate averaged 5.54 percent, up from 5.49 percent the week before. A year ago, it was 6.02 percent, according to Freddie Mac.

When mortgage rates rise, they reduce homebuyers‘ purchasing power. The average rate for a 30-year mortgage has been stuck above 6 percent since September 2022, the year mortgage rates began climbing from historic lows.

That’s helped kept sales of previously occupied U.S. homes stuck at around a 4 million annual pace going back to 2023. Historically, sales have typically hovered around 5.2 million a year.

While sales have been sluggish this year, they received a boost this fall as mortgage rates eased. The average rate for a 30-year home loan has stayed below 6.4 percent since early September. Last month, home sales accelerated to their fastest pace since February.

Mortgage rates are influenced by several factors, from the Federal Reserve‘s interest rate policy decisions to bond market investors’ expectations for the economy and inflation. They generally follow the trajectory of the 10-year Treasury yield, which lenders use as a guide for pricing home loans.

The 10-year yield was at 4.10 percent at midday on Nov. 20. That’s down slightly from two weeks ago, but up from around 3.95 percent on Oct. 22.

Mortgage rates began declining this past summer ahead of the Federal Reserve’s decision in September to cut its main interest rate for the first time in a year amid signs the labor market was slowing. The Fed lowered its key interest rate again last month, although Fed Chair Jerome Powell cautioned that further rate cuts weren’t guaranteed.

Wall Street traders have reduced their bets that the Fed will cut its main interest rate at its next meeting in December, now giving it a roughly 44 percent probability, according to data from CME Group. That’s down from nearly 70 percent a few weeks ago, but better than the 30 percent chance before the release of the delayed September jobs report.

The central bank doesn’t set mortgage rates, and even when it cuts its short-term rates that doesn’t necessarily mean rates on home loans will necessarily decline.

Last fall, after the Fed cut its rate for the first time in more than four years, mortgage rates marched higher, eventually reaching just above 7 percent in January this year. At that time, the 10-year Treasury yield was climbing toward 5 percent.

Recent forecasts by economists at the National Association of Realtors and First American call for the average rate for a 30-year mortgage to drop to around 6 percent next year.

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LOS ANGELES — The number of U.S. homes that typically change hands as people relocate for work, retire or trade up for more living space hasn’t been this low in nearly 30 years.

About 28 out of every 1,000 homes changed hands between January and September. That is the lowest U.S. home turnover rate going back to at least the 1990s, according to an analysis by Redfin.

The home turnover rate represents the number of homes sold, divided by the total number of existing sellable properties. While sales data show whether more or fewer homes are selling in a given period, the home turnover rate helps illustrate how homeowners are staying put longer.

“It’s not healthy for the economy that people are staying put,” said Daryl Fairweather, chief economist at Redfin.

The home sales turnover rate through the first nine months of this year is down about 30 percent from the average rate over the same time periods between 2012 and 2022.

Traditionally, a breadwinner’s new job or a growing family’s need for more space motivate homeowners to sell and relocate. The fact that fewer homes are changing hands suggests there are fewer opportunities for employment mobility or perhaps selling and buying at today’s prices and mortgage rates is unaffordable.

“If people are stuck, it’s reflective of how the economy is stuck,” Fairweather said. “We’re in a low-hire, low-fire labor market and I think that this goes hand in hand with that.”

U.S. employers added just 22,000 jobs in August, according to the Labor Department, down from 79,000 in July and well below the 80,000 that economists had expected.

Government hiring data is on hold during the shutdown, so the Labor Department’s tally of hiring in September was never released, but earlier this month a survey by payroll company ADP showed that the private sector lost 32,000 jobs in September.

Meanwhile, several large companies, including Microsoft, General Motors, Amazon and Target, have announced job cuts.

The slowing job market has many Americans increasingly concerned. That is not a good recipe for home sales.

Another factor keeping a lid on home sales: Many homeowners who bought or refinanced at rock-bottom mortgage rates in 2020 and 2021 have little incentive to sell and buy a home at current home loan rates.

The U.S. housing market has been in a slump dating back to 2022, the year mortgage rates began climbing from historic lows that fueled a homebuying frenzy at the start of this decade.

Sales of previously occupied U.S. homes sank last year to their lowest level in nearly 30 years. Sales have been sluggish this year, although they accelerated last month to their fastest pace since February as mortgage rates eased. The average rate for a 30-year mortgage fell last week to its lowest level in more than a year.

While lower rates boost home shoppers’ purchasing power, borrowing costs remain too high for many Americans to afford to buy a home following years of skyrocketing prices. The median sales price of a previously occupied U.S. home has risen 53 percent over the past six years.

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LOS ANGELES — For years, skyrocketing home values and a modest market inventory gave homeowners the upper hand in transactions. That’s no longer a given.

Across the country, it’s getting tougher for sellers to drive a hard bargain. A dearth of home shoppers who can afford to buy and uncertainty about the outlook for the economy, jobs and mortgage rates is putting pressure on sellers to give ground at the negotiating table.

In some markets, mainly in the South and West, homeowners eager to sell are more likely to give buyers a better deal. This could include a lower price, up-front money to reduce the buyer’s mortgage rate, and funds for closing costs and any repairs or improvements that may pop up after the home inspection.

The reasons: Would-be buyers balk at what they view as unreasonable asking prices, while at the same time new construction is giving buyers more options and putting pressure on sellers to make their homes more appealing.

As a result, while the national median home listing price rose slightly in July, some metro areas saw a decline, signaling a reversal in the power dynamic between buyers and sellers. It’s rare to see the type of eye-popping bidding wars that boosted home values by roughly 50 percent nationally earlier this decade. Low-ball offers are more common.

Nevertheless, the housing market remains mired in a slump. Sales of previously occupied U.S. homes are running about 1.3 percent below where they were through the first seven months of last year, when they sank to their lowest level in nearly 30 years.

The national median home listing price rose slightly in July from a year earlier to $439,450, according to Realtor.com. The real estate listing company found the most a homebuyer who earns the median U.S. household income can afford to spend on a home is $298,000. The analysis assumes a 20 percent down payment and a 30-year mortgage at a fixed rate of 6.74 percent. By those criteria, 7 out of 10 home shoppers are priced out of the market.

The housing market has been in a rut since 2022, when mortgage rates began climbing from historic lows. The number of homes available for sale sank while prices kept rising.

Nationally, more homes are going on sale and remaining unsold longer because buyers have been unwilling or unable to make a deal. Active listings — a tally that encompasses all homes on the market except those pending a finalized sale — increased in July for the 21st month in a row, climbing nearly 25 percent from a year earlier, according to Realtor.com.

The inventory of homes for sale across the U.S. has increased gradually as the market has slowed and is now at a level where supply and demand are more balanced. But in states like Texas and Florida, the number of homes on the market has climbed sharply, partly because those states are hotbeds of new home construction.

Home shoppers may now have more leverage relative to sellers in the South and West, where home inventory has risen in the single digits, compared to pre-pandemic levels. Conditions are tougher in markets in the Midwest and Northeast, where the supply of homes remains 40 percent and 50 percent below pre-pandemic levels, respectively, according to Realtor.com.

After roughly two months on the market and three open houses, Doug McCormick’s home has yet to receive a single offer.

The retired business owner and his wife initially listed the 4-bedroom, 4.5-bath house located in Evergreen, a mountain community about 30 miles west of Denver, for $1.3 million. They lowered their asking price to about $1.28 million. That, too, failed to bring in a buyer.

McCormick, 80, says he’s hoping mortgage rates ease a bit and bring out more buyers. But he’s also considering just renting the property.

“That’s something that’s kind of in the back of my mind,” he said. “I keep reminding myself you only need one buyer.”

McCormick’s situation is not unique. As demand has slowed, more sellers have resorted to lowering their initial asking price — often multiple times — to no avail.

“Even though we are seeing a substantial amount of price reductions, sometimes it’s not enough to move the home; it’s still sitting,” said Annie Foushee, an agent with Redfin in Denver.

The median home listing price in Austin fell 4.9 percent in July from a year earlier, while in Miami it dropped 4.7 percent. Among other metro areas that had sharp drops in their listing price were: Chicago (4.4 percent), Los Angeles (4.2 percent) and Denver (4 percent).

In markets where buyers now have the upper hand, sellers who can afford to wait are often opting to pull their listing rather than be pressured into drastically reducing the price.

Tammy Tullis put her home in the Miami suburb of South Miami on the market in June. But the 4-bedroom, 3.5-bath house didn’t receive many offers initially, so she dropped her $2.8 million asking price by $100,000. That helped drive turnout during an open house, but she received only low-ball offers.

“They were like $400,000 to $500,000 off the mark,” said Tullis, 51.

Last month, the finance consultant took the listing down. She may relist it soon.

“I want to sell, but I’m not in a rush-rush,” Tullis said.

The Trump administration has pushed the Federal Reserve to lower interest rates, saying it would help the housing market. But homebuyers – and politicians – should keep in mind that the central bank directly influences only short-term rates, while most mortgages are based on the yield of the 10-year Treasury.

And while lower mortgage rates would boost home shoppers’ purchasing power, they also could bring in more buyers, giving sellers less incentive to keep lowering prices.

Economists generally expect the average rate for a 30-year mortgage to remain near the mid-6-percent range this year.

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The average rate for a 30-year U.S. mortgage has fallen to its lowest level in nearly 10 months, giving prospective homebuyers a sorely needed boost in purchasing power that could help inject life into a stagnant housing market.

The long-term rate dropped from 6.63 percent to 6.58 percent last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.49 percent.

Borrowing costs for 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also fell. The average rate dropped from 5.75 percent to 5.71 percent last week. A year ago, it was 5.66 percent, Freddie Mac said.

Elevated mortgage rates have helped keep the U.S. housing market in a sales slump since early 2022, when rates started to climb from the rock-bottom lows they reached during the pandemic. Home sales sank last year to their lowest level in nearly 30 years.

This is the fourth week in a row that rates have come down. The average rate for a 30-year mortgage is now at its lowest level since Oct. 24, when it averaged 6.54 percent.

Mortgage rates are influenced by several factors, such as the Federal Reserve‘s interest rate policy decisions and bond market investors’ expectations for the economy and inflation.

The main barometer is the 10-year Treasury yield, which lenders use as a guide to price home loans. The yield was at 4.29 percent at midday on Thursday, up slightly from 4.24 percent late Wednesday.

The yield has come down the last couple of weeks after weaker-than-expected July U.S. job market data fueled speculation that the Fed will cut its main short-term interest rate next month.

A Fed rate cut could give the job market and overall economy a boost, but it could also fuel inflation just as President Trump’s tariff policies risk raising prices for U.S. consumers.

Meanwhile, a new inflation report Thursday showed prices at the U.S. wholesale level jumped 3.3 percent last month from a year earlier. That was well above the 2.5 percent rate that economists had forecast, and it could hint at higher inflation ahead.

Earlier this week, the Labor Department said consumer prices in July, though unchanged from June, rose 2.7 percent from a year earlier.

Higher inflation could push bond yields higher, driving mortgage rates upward in turn, even if the Fed cuts its key rate.

Economists generally expect the average rate for a 30-year mortgage to remain above 6 percent this year. Recent forecasts by Realtor.com and Fannie Mae project the average rate will ease to around 6.4 percent by the end of this year.

That may not be low enough to make a difference. While trends like declining home listing prices and more properties on the market in the Sunbelt and West now favor buyers, affordability remains a major hurdle for many aspiring homeowners.

Home price growth has slowed nationally, but the median sales price of a previously occupied U.S. home still climbed to an all-time high of $435,300 in June.

“Homebuyers who have been relegated to the sidelines by high financing costs got some encouragement in the past two weeks, but it remains to be seen if it’s enough to get more of them back in the game,” said Joel Berner, senior economist at Realtor.com.

The recent drop in mortgage rates has spurred many homeowners to refinance, however.

Mortgage applications jumped 10.9 percent last week from the previous week as rates eased, boosted by homeowners seeking to refinance, according to the Mortgage Bankers Association.

Home loan refinance applications made up nearly 47 percent of all mortgage applications. Refi loan applications jumped 23 percent from a week earlier – the strongest showing since April.

Meanwhile, applications for adjustable-rate mortgages, or ARMs, soared 25 percent to their highest level since 2022, MBA said.

Many homeowners aren’t waiting for rates to ease further before refinancing. Cash-out home refinancing activity surged to a nearly three-year high in the April-June quarter, as homeowners tapped some of the equity gains built up after years of soaring home prices.

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LOS ANGELES — Real estate investors are snapping up a bigger share of U.S. homes on the market as rising prices and stubbornly high borrowing costs freeze out many other would-be homebuyers.

Nearly 27 percent of all homes sold in the first three months of the year were bought by investors – the highest share in at least five years, according to a report by real estate data provider BatchData. Between 2020 and 2023, the share of homes bought by investors averaged 18.5 percent.

All told, investors bought 265,000 homes in the January-March quarter. That was an increase of 1.2 percent from the same period a year earlier, the firm said.

Despite the modest annual increase, the rise in the share of investor home purchases is more a reflection of how much the housing market has slowed as traditional buyers face growing affordability constraints, according to BatchData.

The U.S. housing market has been in a sales slump since early 2022, when mortgage rates began to climb from pandemic-era lows. Home sales fell last year to their lowest level in nearly 30 years.

They’ve remained sluggish so far this year, as many prospective homebuyers have been discouraged by elevated mortgage rates and home prices that have kept climbing, though more slowly.

As home sales have slowed, properties are taking longer to sell. That’s led to a sharply higher inventory of homes on the market, benefiting investors and other home shoppers who can afford to bypass current mortgage rates by paying in cash or tapping home equity gains.

“As traditional buyers struggle with affordability, investors with cash and financing advantages are stepping in to maintain transaction volume,” according to the report.

BatchData analyzes U.S. home sales records to determine which properties were purchased by investors. These could include vacation homes or rentals, but not a homebuyer’s primary residence.

Investors bought 1.2 million homes in 2024, up from an average of 1.1 million homes per year going back to 2020, according to BatchData.

Even so, investor-owned homes account for roughly 20 percent of the nation’s 86 million single-family homes, the firm said.

Of those, mom-and-pop investors, or those who own between 1 and 5 homes, account for 85 percent of all investor-owned residential properties, while those with between 6 and 10 properties account for another 5 percent.

Institutional investors that own 1,000 or more homes account for only about 2.2 percent of all investor-owned homes, the firm said.

And that number could get smaller, amid signs that large institutional investors are scaling back home purchases.

Out of a group of eight of the biggest companies that own and lease single-family houses, including Invitation Homes and American Homes 4 Rent, six sold more homes in the second quarter than they bought, according to data from Parcl Labs.

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Sales of previously occupied U.S. homes fell in April, as elevated mortgage rates and rising prices discouraged prospective homebuyers during what’s traditionally the busiest time of the year for the housing market.

Existing home sales dropped 0.5 percent last month, from March, to a seasonally adjusted annual rate of 4 million units, the National Association of Realtors said Thursday. The decline marks the slowest sales pace for the month of April going back to 2009 in the wake of the U.S. housing crisis. March’s sales pace was also that month’s slowest going back to 2009.

Sales fell 2 percent compared with April last year. The latest home sales fell slightly short of the 4.10 million pace economists were expecting, according to FactSet.

Home prices increased on an annual basis for the 22nd consecutive month, although at the slowest rate since July 2023. The national median sales price rose 1.8 percent in April from a year earlier to $414,000, an all-time high for the month.

“The affordability condition is clearly hurting the market, particularly higher mortgage rates,” said Lawrence Yun, NAR‘s chief economist.

For the past three years, sales of previously occupied U.S. homes have been at about 75 percent of what they were before the pandemic. The market slump began in early 2022, when mortgage rates began to climb from pandemic-era lows. Sales of homes fell last year to their lowest level in nearly 30 years.

The average rate for a 30-year mortgage has remained relatively close to its high so far this year of just above 7 percent, which it set in mid-January, according to mortgage buyer Freddie Mac. The average rate’s low point so far was five weeks ago, when it briefly dropped to 6.62 percent. Last week, it averaged 6.86 percent, its highest level since mid-February.

Homes purchased last month likely went under contract in March or April, when the average rate for a 30-year mortgage ranged from 6.62 to 6.83 percent.

High mortgage rates, which can add hundreds of dollars per month in costs for borrowers, have frozen out many would-be homebuyers struggling to find a home they can afford.

Homeownership is out of reach for many Americans after years of surging home prices. The median U.S. home sales price has jumped 53 percent over the past six years.

Home shoppers who can afford to buy at current mortgage rates are benefiting from more homes on the market when compared with recent years.

There were 1.45 million unsold homes at the end of last month, a 9 percent increase from March, and 20.8 percent more than April last year, NAR said. That’s the most homes on the market since September 2020, but still significantly fewer than the roughly 2 million homes for sale that was typical before the pandemic.

The latest unsold inventory snapshot translates to a 4.4-month supply at the current sales pace, up from a 3.5-month pace at the end of April last year. Traditionally, a supply of five to six months is considered a balanced market between buyers and sellers.

One reason the inventory of homes for sale has been rising is that properties are taking longer to sell. Homes typically remained on the market for 29 days last month before selling, up from 26 days in April last year, NAR said.

The wider selection of homes on the market likely helped boost sales among first-time homebuyers. They accounted for 34 percent of sales last month – the highest level since July 2020 but still down from the historical norm of 40 percent.

Home shoppers who can afford to sidestep mortgage rates and pay all cash for a home accounted for 25 percent of sales last month, down from 28 percent a year earlier. Investors, who account for many all-cash purchases, made up 15 percent of home sales last month, down from 16 percent a year earlier, NAR said.

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LOS ANGELES (AP) — U.S. homeowners are spending more on home renovation projects, bucking a broader pullback by consumers amid diminished confidence in the economy.

Sales at building materials and garden supply retailers rose 0.8 percent last month from March, the biggest gain since 2022, and were up 3.2 percent from April last year. At the same time, U.S. retail sales overall rose 0.1 percent, a sharp slowdown from March.

The trend comes even as prices for home improvement products have been rising.

The cost of home repairs and remodeling climbed by nearly 4 percent in the first quarter from a year earlier, according to Verisk’s Remodel Index. The strategic data analytics firm tracks costs for more than 10,000 home repair items, from appliances to windows.

Recent price increases appear to be driven primarily by labor costs and don’t appear to reflect the ongoing trade war that the Trump administration is engaged in with major U.S. trading partners like Mexico, China and Canada.

“We haven’t seen panic buying from contractors or investors concerned about the impact tariffs might have on future costs, or labor rates being driven up by stricter enforcement of immigration policies,” Greg Pyne, vice president of pricing for Verisk Property Estimating Solutions, said in a report earlier this month.

Home Depot said this week that it doesn’t expect to raise prices because of tariffs, saying it has spent years diversifying the sources for the goods on its shelves. However, executive Billy Bastek said some products now on Home Depot shelves may disappear.

He also noted that the chain is seeing fewer customers taking on large home improvement jobs like kitchen and bath remodels, because high interest rates may be dissuading homeowners from borrowing money to finance such projects.

Spending on home renovations has remained resilient as elevated mortgage rates and skyrocketing home prices have frozen out many would-be buyers. That’s kept U.S. home sales in a slump, limiting the market for homeowners who want to sell.

Many homeowners also bought or refinanced their mortgage when the average rate on a 30-year home loan was below 3 percent or 4 percent in the first couple of years of the pandemic. That’s made them reluctant to sell now, when the average rate is hovering near 7 percent.

In response, many homeowners have opted to to invest in sprucing up their home rather than sell and take on a mortgage with a sharply higher interest rate.

A shortfall in new home construction more than a decade in the making has kept people living in older homes longer. Nearly half of the owner-occupied homes in the U.S. were built before 1980 and have a median age of 41 years, according to an analysis of Census data by the National Association of Home Builders. That aging stock of homes has helped fuel the need for repairs and improvements.

Harvard University’s Joint Center for Housing Studies’ most recent quarterly outlook of home improvement projects that spending on home renovations will continue to increase this year, despite economic uncertainty.

Spending by homeowners on maintenance and home improvement projects increased 0.5 percent in the first quarter from a year earlier to $513 billion, according to the JCHS’ leading indicator of remodeling activity, or LIRA.

It also forecasts annual increases from here that will drive spending to $526 billion by the first quarter of next year. That would represent a 2.5 percent increase from the first quarter of this year.

Rising home prices and signs of a solid economy have supported the outlook for higher spending on home improvement, but that could change if the housing market and economic outlook worsen, said Carlos Martín, director of the JCHS’ Remodeling Futures Program.

“Building materials retail sales are strong, but we are seeing a significant downturn in the sales of existing homes and their median sales price since the last projection — both are known contributors to home improvements,” Martin said. “Broader economic turbulence like a recession, a worsening job market or higher inflation would almost certainly temper our expectations.”

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