Housing starts fell 14.4% year-over-year in May to a seasonally adjusted annual rate of 1.55 million, according to the latest data from the National Association of Home Builders (NAHB), as significant economic uncertainty and rising mortgage rates press down on both margins and home demand.
Even as lumber prices fall, overall construction costs remain high, up 19% from last year according to NAHB chair Jerry Konter, who said in a statement he anticipates more struggles going forward.
“As the market weakens due to cyclical factors, the long-term housing deficit will persist and continue to frustrate prospective renters and home buyers,” he predicted.
Multi-family starts saw the biggest annualized decline, down 23.7%, with single-family dropping 9.2%. The multi-family category includes both condos and apartments.
“In further signs that the housing market is weakening, single-family permits are down 2.5% on a year-to-date basis and home builder confidence has declined for the last six months,” said NAHB Chief Economist Robert Dietz in a statement.
The takeaway:
On a regional and year-to-date basis, combined single-family and multifamily starts are 2.1% higher in the Northeast, 1.2% higher in the Midwest, 12.9% higher in the South and 4.3% higher in the West.
At the same time, Dietz pointed out that housing completions are actually up due to an acceleration of building in recent quarters, meaning in the short term, inventory might see an increase.
But in the medium and long term, the prospect for new construction remains dour. Overall permits fell 7% annualized in May, with single-family down 5.5% and multi-family decreasing 9.4%. The pace is the lowest since July of 2020.
Hannah Jones, realtor.com economic data analyst, said in a statement that some of this data is indicative of a housing market coming back into balance, albeit painfully.
“Discouraging as they may sound, these forces are beginning to help balance the housing market. For more than a month, the number of homes listed for sale has increased,” she said. “Additionally, home price acceleration is showing early signs of steadying. Should home completions ramp up, buyers will see some relief in the form of increased housing supply.”
