U.S. single-family homebuilding showed signs of recovery in November 2024, following the diminishing impact of hurricanes. However, concerns about tariffs on imported goods and potential labor shortages due to mass deportations of immigrants could affect new construction in the coming year. A report from the Commerce Department indicated a modest increase in permits for future single-family home construction, suggesting that residential investment may not significantly contribute to economic growth in the fourth quarter.
Despite the Federal Reserve’s recent rate cuts, higher mortgage rates continue to limit the housing market. The situation could be exacerbated by proposed tariffs and the potential expulsion of undocumented immigrants by President-elect Donald Trump. The Federal Reserve delivered its third consecutive rate cut but reduced its projections for the following year to just two rate reductions, citing ongoing economic resilience. Concerns have also been raised that some of Trump’s policies could lead to inflation.
Bradley Saunders, North America economist at Capital Economics, expressed a less optimistic outlook, noting that Trump’s proposed trade and immigration policies might undermine homebuilders’ supply capacity. The Census Bureau reported a 6.4% increase in single-family housing starts, reaching a seasonally adjusted annual rate of 1.011 million units. However, homebuilding faced challenges throughout the year, partly due to a severe shortage of existing homes for sale.
Although the Federal Reserve began cutting rates in September, the 30-year fixed mortgage rate remained near 7%, influenced by rising 10-year Treasury yields and inflation concerns linked to the incoming administration. JPMorgan economist Abiel Reinhart suggested that limited room for mortgage rate cuts is expected, with Treasury strategists forecasting only a minor decrease in 10-year rates by the end of next year. Additionally, concerns about reduced net immigration were raised, which could impact household growth and labor availability in the construction sector. Following the Fed’s rate projections, stocks on Wall Street dropped, the dollar strengthened against a basket of currencies, and U.S. Treasury yields rose.
Chinese property developer Kaisa has announced that its shareholders have approved the issuance of $4.8 billion in mandatory convertible bonds as part of its debt restructuring plan. Additionally, shareholders approved a work fee share of approximately $26.9 million to Citicorp International, which serves as a bond trustee for an ad hoc group of bondholders.
Kaisa, one of the many developers impacted by China’s property crisis, has been working on restructuring its debt since it defaulted on $12 billion in offshore bonds in late 2021. The restructuring plan encompasses various debts, including loans and yuan-denominated asset-backed securities. Kaisa is the second-largest offshore debt issuer among Chinese developers, following China Evergrande Group, and was the first to default on dollar bonds back in 2015.
The company is scheduled for a Hong Kong court hearing on December 19, where it intends to seek permission to hold a creditors’ vote on its debt overhaul plan.
