New home construction hot the skids last month to the lowest level in 2 years. Despite comments from the Fed that the recovery is on track and on firm footing as early as yesterday the data out today showing a 22.5% plunge in new permits and construction starts seems to tell a differnet tale.

Slowing sales of existing homes marked with a continuous drop in home prices will more than likely put pressure on new construction the rest of the year. Mortgage rates hit record lows in 2010 and helped spark a mini refinance boom and also helped buyers who may have been on the fence of buying a home make the leap as low rates meant even lower mortgage payments. Rates however have risen rapidly since the end of last year and peaked around 5 percent for a 30 year fixed mortgage, a big jump from the lows of the high 3’s earlier that year. This also has contributed to a slowing in home sales.

Mortgage rates recently have started to come down a bit and may be the key along with the jobs market to helping the housing recovery. How soon or when is yet to be determined.