Single-Family Starts Decline as Rates, Headwinds Increase

Economics
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The single-family housing market continued to show signs of slowing in April as rising mortgage rates and ongoing supply chain disruptions continue to raise housing costs and take a toll on the housing market.

Due to a surge in multifamily production, overall housing starts held fairly steady, falling just 0.2% to a seasonally adjusted annual rate of 1.72 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The April reading of 1.72 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts decreased 7.3% to a 1.10 million seasonally adjusted annual rate. The multifamily sector, which includes apartment buildings and condos, increased 15.3% to an annualized 624,000 pace.

“Lower single-family construction starts in April reflects our recent builder surveys showing notably weaker confidence in the single-family market, as rising mortgage rates and building material construction costs are driving more potential buyers out of the market,” said Jerry Konter, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Savannah, Ga. “President Biden’s plan to address housing affordability challenges is a welcome development, but the administration needs to focus more on resolving rising lumber and building material prices and supply chain bottlenecks that are raising housing costs far faster than wages.”

“Today’s housing starts report is more evidence that the single-family market is slowing,” said NAHB Chief Economist Robert Dietz. “While single-family starts are up 4.1% on a year-to-date basis, we’re expecting flat conditions for the year and a decline in 2023 as housing affordability challenges in the form of higher mortgage rates and construction costs continues to worsen housing affordability conditions. Single-family permits are down 2.3% on a year-to-date basis thus far in 2022.”

On a regional and year-to-date basis, combined single-family and multifamily starts are 6.3% higher in the Northeast, 5.2% higher in the Midwest, 13.3% higher in the South and 8.3% higher in the West.

Overall permits decreased 3.2% to a 1.82 million unit annualized rate in April. Single-family permits decreased 4.6% to a 1.11 million unit rate. Multifamily permits decreased 1.0% to an annualized 709,000 pace.

Looking at regional permit data on a year-to-date basis, permits are 4.9% lower in the Northeast, 4.0% higher in the Midwest, 3.5% higher in the South and 1.3% higher in the West.

Single-family permits authorized but not started are up 8.5% year-over-year to 153,000 units. Meanwhile, single-family units under construction are still growing, up 26% year-over-year to 815,000 units.