High mortgage rates and building production bottlenecks continue to act as a drag on the single-family housing market even as overall housing starts posted a double-digit gain in August due to a surge in multifamily production.
Overall housing starts increased 12.2% to a seasonally adjusted annual rate of 1.58 million units in August off of a downwardly revised July reading, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
The August reading of 1.58 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 increased 3.4% to a 935,000 seasonally adjusted annual rate. Year to date, single-family starts are down 4%. The multifamily sector, which includes apartment buildings and condos, increased 28% to an annualized 640,000 pace.
“Single-family production is running at a weakened pace due elevated mortgage rates and high construction costs that have led to a major slowing of the housing market and exacerbated housing affordability,” said Jerry Konter, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Savannah, Georgia. “The slowdown in the single-family market has been reflected in our builder surveys, which have posted declines every month in 2022.”
“Today’s housing starts report is more evidence that the housing recession is deepening for the single-family market, with the pace below 1 million for the last two months,” said Jing Fu, NAHB’s director of forecasting and analysis. “Expected additional tightening of monetary policy from the Federal Reserve, falling builder sentiment and a 15.3% year-over-year decline in single-family permits points to further weakening for the housing sector. The one bright spot is multifamily construction, which remains very strong given solid demand for rental housing.”
On a regional and year-to-date basis, combined single-family and multifamily starts are 4.6% higher in the Northeast, 2.4% lower in the Midwest, 5.6% higher in the South and 1.5% lower in the West.
Overall permits decreased 10.0% to a 1.52 million unit annualized rate in August. Single-family permits decreased 3.5% to an 899,000 unit rate. Multifamily permits decreased 17.9% to an annualized 618,000 pace.
Looking at regional permit data on a year-to-date basis, permits are 3.1% lower in the Northeast, 1.2% higher in the Midwest, 1.2% higher in the South and 1.4% lower in the West.
The number of apartments under construction (890,000 residents in 2-plus unit properties) is at the highest level since the first quarter of 1974.