A sharp decline in single-family home construction is another indicator that the housing slowdown is showing no signs of abating, as rising construction costs, elevated mortgage rates and supply chain disruptions continue to act as a drag on the market.
Overall housing starts fell 9.6 percent to a seasonally adjusted annual rate of 1.45 million units in July, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
The July reading of 1.45 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 10.1 percent to a 916,000 seasonally adjusted annual rate and are down 2.1 percent on a year-to-date basis. This is the lowest reading for single-family home building since June 2020. The multifamily sector, which includes apartment buildings and condos, decreased 8.6 percent an annualized 530,000 pace.
“The decline in single-family starts is reflected in our latest builder surveys, as housing demand continues to weaken on higher interest rates while on the supply side builders continue to grapple with higher construction costs,” 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.”
“A housing recession is underway with builder sentiment falling for eight consecutive months while the pace of single-family home building has declined for the last five months,” said NAHB Chief Economist Robert Dietz. “However, multifamily construction remains very strong given the solid demand for rental housing. The number of multifamily 5+ units currently under construction is up 24.8 percent year-over-year.”
On a regional and year-to-date basis, combined single-family and multifamily starts are 10.7 percent higher in the Northeast, 0.4 percent lower in the Midwest, 6.5 percent higher in the South and 2.2 percent lower in the West.
Overall permits decreased 1.3 percent to a 1.67 million unit annualized rate in July. Single-family permits decreased 4.3 percent to a 928,000 unit rate and are down 5.9 percent on a year-to-date basis. Multifamily permits increased 2.8 percent to an annualized 746,000 pace.
Looking at regional permit data on a year-to-date basis, permits are 1.9 percent lower in the Northeast, 1.9 percent higher in the Midwest, 2.6 percent higher in the South and 0.2 percent higher in the West.