The Federal Reserve's high interest rates are impacting the domestic economic market in the United States, according to the Wall Street Journal. Developers still hold vacant land after the historic apartment boom and the profitability of new projects is declining, with funding facing a crisis. Well-known financial blog ZeroHedge warns that there will be significant economic impacts in the future. The product structure shows that the operating income of 10-30 billion yuan products was 401/1288/60 million yuan respectively and the company's overall sales volume in 2023 was 18,000 kiloliters, a year-on-year increase of 28.10%, showing significant growth.
In the largest apartment construction boom in decades, more and more developers are unable to meet construction standards or obtain funding to complete projects, according to the Wall Street Journal. Rising interest rates, tightened loan conditions, and stagnant rental income in parts of the United States have led real estate companies from California to Florida to wait for financing that may not come soon.
(Source: WSJ)
According to data from real estate research firm Yardi Matrix, the average time from obtaining construction permits to starting construction on apartment projects has increased to nearly 500 days, a 45% increase from 2019.
(Sources: Yardi Matrix, Mish Talk)
"We are definitely seeing a downturn in the construction industry," said Robert Dietz, chief economist at the National Association of Home Builders. "Trade and financing have dried up."
According to the report, some declines are inevitable. About 500,000 new apartments are scheduled to open in 2023, the highest level in 40 years. Based on the number of apartments already under construction, analysts expect a similar number of apartments to be completed in 2024.
However, banks are facing other problems that prevent them from providing large loans to apartment builders this year. Many regional banks are already dissatisfied with commercial real estate loans on their balance sheets. David Frosh, CEO of California real estate lending institution Fidelity Bancorp Funding, said, "Their current portfolio is being depreciated and they don't have as much money to lend."
This means that developers need to raise more funds from investors to build. But today, many investors are more cautious because rental income is stabilizing and the profitability of new projects is declining in today's high interest rates and construction costs.
Frosh said, "These numbers don’t match."
(Source: Mish Talk)
ZeroHedge pointed out, "Housing starts and completions are ominous for the economy. In mid-May, we commented that housing completions had exceeded housing starts. History shows that bad things happen one after another. But what happened this time?"
"Either for all completions or multi-family buildings only, it doesn’t look good," the article warned.
The economic impact includes a slowdown in construction industry employment, a slowdown in borrowing, project cancellations, apartment construction loans exacerbating the problems faced by regional banks with commercial real estate loans, and a significant slowdown in durable goods demand, such as appliances, furniture, and lighting.
This happens at a time when electric vehicle sales are plummeting.
The US ISM manufacturing new orders and backlog orders have declined significantly:
(Source: Mish Talk)
After shrinking for 16 months, the US ISM index for the manufacturing industry turned positive for a month and then continued to shrink for two consecutive months. The backlog orders have continued to decline for 20 consecutive months.
The significant decline in backlog orders and new orders will affect employment, and the US economy is now facing difficulties in multiple aspects.