HOUSTON (ICIS)–US builders are reducing the
sizes of single- and multifamily housing to
make them more affordable as mortgage rates
reach 20-year highs, an executive at Huntsman
US mortgage rates have been rising with the
benchmark interest rate, which is set by the
The US central bank could raise rates by
one more quarter point from the current
5.25-5.50% as part of its campaign to bring
inflation down to its target of 2%.
That campaign by the Fed has helped push
average mortgage rates to 7.19%, a 20-year
high, according to Freddie Mac, a company that
buys and securitises home loans.
Those higher rates are one of the factors
making housing unaffordable to a growing number
of US consumers.
Home builders are responding by reducing the
size of single-family houses by 10%, said Jan
Buberl, Huntsman vice president polyurethanes
Americas and global propylene oxide (PO)/methyl
tertiary butyl ether (MTBE).
For multifamily housing, the reduction is 20%,
CONSTRUCTIONBuberl noted that
many multifamily projects under construction
were financed when interest rates were much
It is unclear if similar projects would be
viable under today’s much higher interest rate
environment, he said.
important to Huntsman’s polyurethanes business
because two-thirds of its sales in the Americas
are tied to the sector, Buberl said. Out of
that, 60% is tied to residential construction
in the Americas and 40% is tied to commercial
For residential construction, a lot of
Huntsman’s polyurethane chemicals are used in
insulation and oriented strand board (OSB).
For the chemical industry in general, housing
is a key end-use market in the form of paints,
wire insulation, house-wrap, sealants, roofing
materials, resilient flooring, vinyl siding and
many other chemical and plastic-related
products. Other products include plastic
pipe, insulation, paints and coatings,
adhesives and synthetic fibres.
New housing also generates sales of appliances,
furniture, carpet, fixtures and window
treatments. In total, each start engenders on
average over $13,000 worth of chemistry.
years past, consumers would have bought
existing homes if they could not afford a new
one. However, the US has a shortage of existing
homes because of a drought in house
construction that followed the 2008-2009
In addition, people who own homes are reluctant
to sell them because their purchases were
financed with relatively cheap loans, Buberl
said. The average mortgage rate for current
homeowners is 4%.
If consumers continue to hang on to their
homes, they may choose to remodel and renovate,
which would require polyurethanes and other
plastics and chemicals used in construction.
housing is unaffordable for a large number of
consumers, a significant share of them are at
the age when people typically buy homes.
Those demographics, the shortage of housing and
the smaller size of new homes could encourage
more construction and sales even as mortgage
rates remain high.
For multifamily housing, higher interest rates
could make it more difficult to arrange the
financing for future projects. Developers could
try to offset those financing pressures by
building smaller projects.
CURRENT SNAPSHOT OF COMMERCIAL
CONSTRUCTIONBuberl noted that
office construction is in a difficult situation
because of vacancies caused by people working
Warehouse construction has just come off of a
wave of activity. It is close to equilibrium,
with room for some additional growth.
Companies are building a lot of industrial
plants closer to their customers in a
phenomenon known as reshoring or nearshoring,
These types of industrial projects have flat
roofs that require insulation. Walls also
Roofs and concrete floors require coatings.
The Polyurethanes Technical Conference is held
by the Center for the Polyurethanes Industry
(CPI). It continues on Tuesday and runs through
Interview article by Al
Thumbnail shows a home being built. Image
by the National Association of Home Builders