Housing Starts Decline in January on Multifamily Weakness

A sharp decline in multifamily starts pushed overall housing starts down in January even as single-family production showed signs of a gradual improvement later this year as interest rates continue to moderate.

Overall housing starts decreased 14.8% in January to a seasonally adjusted annual rate of 1.33 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The January reading of 1.33 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 4.7% to a 1 million seasonally adjusted annual rate. However, single-family starts are up 22% compared to a year ago. The multifamily sector, which includes apartment buildings and condos, decreased 35.6% to an annualized 327,000 pace.

“Moderating mortgage interest rates in 2024 will ultimately lead to gains for single-family home building this year,” said Alicia Huey, chairman of the National Association of Home Builders (NAHB) and a custom home builder and developer from Birmingham, Ala. “However, tighter lending conditions and higher costs for construction and development loans are holding back some construction at the start of the year.”

“Multifamily construction is forecasted to post a large decline in 2024 as the number of units currently under construction is near the highest level since 1973,” said NAHB Chief Economist Robert Dietz. “Meanwhile, single-family production, which is currently running at a 1-million-unit annual rate, is roughly in line with builder sentiment that remains right below a breakeven level, according to our latest surveys. We are forecasting single-family starts to post a modest gain in 2024 as mortgage rates moderate on expected interest rate cuts by the Federal Reserve later this year.”

On a regional basis compared to the previous month, combined single-family and multifamily starts are 20.6% lower in the Northeast, 30% lower in the Midwest, 9.7% lower in the South and 15.7% lower in the West.

Overall permits decreased 1.5% to a 1.47 million unit annualized rate in January. The disparity in permit growth between single-family and multifamily construction is consistent with the outlook for each submarket. Single-family permits increased 1.6% to a 1.02 million unit rate, the highest since May 2022. Multifamily permits decreased 7.9% to an annualized 455,000 pace, the lowest since April 2020.

Looking at regional permit data compared to the previous month, permits are 19.4% higher in the Northeast, 6.6% higher in the Midwest, 7% lower in the South and 1.5% higher in the West.

The number of apartments under construction dipped below 1 million for the first time since May 2023, with additional declines expected in 2024. In contrast, the number of single-family homes under construction stood at 680,000 in January, matching the best reading since June 2023.