The housing market continues to weaken because stubbornly high construction costs, elevated interest rates and flagging demand are harming housing affordability, according to the National Association of Home Builders (NAHB). The multifamily units under construction is reaching a near 50-year high, and multifamily permit growth is weakening. Single-family housing starts continued to fall in November, with the pace of construction down 32% since February when mortgage rates began to rise.
Overall housing starts decreased 0.5% to a seasonally adjusted annual rate of 1.43 million units in November, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
The November 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 4.1% to an 828,000 seasonally adjusted annual rate. Year-to-date, single-family starts are down 9.4%. The multifamily sector, which includes apartment buildings and condos, increased 4.9% to an annualized 599,000 pace.
“It’s no surprise that single-family starts are running at their lowest level since May 2020, given that builder sentiment has dropped for 12 consecutive months as builders remain fixated on rising building material costs and supply chain bottlenecks, with electrical transformers in particular being in short supply,” said Jerry Konter, chairman of NAHB and a home builder and developer from Savannah, Georgia.
“One important characteristic of the single-family housing market is that there have been more single-family homes that completed construction than have been started over the past four months,” said NAHB Chief Economist Robert Dietz. “The most recent data for November shows there were 25,500 more single-family homes completed than started, thus pushing down the number of new homes under construction.”
On a regional and year-to-date basis, combined single-family and multifamily starts are 1.3% higher in the Northeast, 0.8% higher in the Midwest, 0.6% higher in the South and 7.0% lower in the West.
Overall permits decreased 11.2% to a 1.34 million unit annualized rate in November. Single-family permits decreased 7.1% to a 781,000 unit rate. Multifamily permits decreased 16.4% to an annualized 561,000 pace, the lowest reading for apartment permits since September 2021.
Looking at regional permit data on a year-to-date basis, permits are 5.6% lower in the Northeast, 0.5% lower in the Midwest, 0.6% lower in the South and 6.5% lower in the West.
The number of multifamily units under construction for November is 932,000; this is the highest number since December 1973. The number of single-family units under construction has fallen for six consecutive months, declining to 777,000 homes in November.