Single-Family Starts Fall to Two-Year Low on Higher Construction Costs and Interest Rates
Increased interest rates, building material supply chain bottlenecks and elevated construction costs continue to put a damper on the single-family housing market. For the first time since June 2020, both single-family starts and permits fell below a 1 million annual pace.
Overall housing starts fell 2.0% to a seasonally adjusted annual rate of 1.56 million units in June from an upwardly revised reading the previous month, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
The June reading of 1.56 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 8.1% to a 982,000 seasonally adjusted annual rate. This is the lowest single-family starts pace since June 2020. The multifamily sector, which includes apartment buildings and condos, increased 10.3% an annualized 577,000 pace.
“Single-family starts are retreating on higher construction costs and interest rates, and this decline is reflected in our latest builder surveys, which show a steep drop in builder sentiment for the single-family market,” said Jerry Konter, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Savannah, Ga. “Builders are reporting weakening traffic as housing affordability declines.”
“While the multifamily market remains strong on solid rental housing demand, the softening of single-family construction data should send a strong signal to the Federal Reserve that tighter financial conditions are producing a housing downturn,” said NAHB Chief Economist Robert Dietz. “Price growth will slow significantly this year, but a housing deficit relative to demographic need will persist through this ongoing cyclical downturn.”
On a regional and year-to-date basis, combined single-family and multifamily starts are 4.4% lower in the Northeast, 4.7% higher in the Midwest, 11.1% higher in the South and 0.4% lower in the West.
Overall permits decreased 0.6% to a 1.69 million unit annualized rate in June. Single-family permits decreased 8.0% to a 967,000 unit rate. This is the lowest pace for single-family permits since June 2020. Multifamily permits increased 11.5% to an annualized 718,000 pace.
Looking at regional permit data on a year-to-date basis, permits are 5.1% lower in the Northeast, 2.5% higher in the Midwest, 2.9% higher in the South and 3.0% higher in the West.