Elevated mortgage rates, high construction costs for concrete and other building materials and weakening demand stemming from deteriorating affordability conditions continue to act as a drag on single-family housing production.
Overall housing starts decreased 4.2% to a seasonally adjusted annual rate of 1.43 million units in October, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
The October reading of 1.43 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 6.1% to an 855,000 seasonally adjusted annual rate. Year-to-date, single-family starts are down 7.1%. The multifamily sector, which includes apartment buildings and condos, decreased 1.2% to an annualized 570,000 pace.
“Mirroring ongoing falloffs in builder sentiment, builders are slowing construction as demand retreats due to high mortgage rates, stubbornly elevated construction costs and declines for housing affordability,” said Jerry Konter, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Savannah, Ga.
“This will be the first year since 2011 to post a calendar year decline for single-family starts,” said NAHB Chief Economist Robert Dietz. “We are forecasting additional declines for single-family construction in 2023, which means economic slowing will expand from the residential construction market into the rest of the economy.”
On a regional and year-to-date basis, combined single-family and multifamily starts are 2.9% higher in the Northeast, 1.5% lower in the Midwest, 2.6% higher in the South and 5.1% lower in the West.
Overall permits decreased 2.4% to a 1.53 million unit annualized rate in October. Single-family permits decreased 3.6% to an 839,000 unit rate. Multifamily permits decreased 1.0% to an annualized 687,000 pace.
Looking at regional permit data on a year-to-date basis, permits are 2.8% lower in the Northeast, 0.2% higher in the Midwest, 1.1% higher in the South and 4.0% lower in the West.
Multifamily units under construction climbed again in October to 928,000, the highest tally since December 1973.