Despite high mortgage rates and other economic challenges, housing starts saw a significant gain in September, according to a new report from the National Association of Home Builders (NAHB) using data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. Experts point to a lack of existing inventory as a reason for the growth.
Housing starts rose 7% in September, as NAHB reported, to a rate of 1.36 million units. Single-family starts increased 3.2% to a rate of 963,000, but were 12.8% lower year-to-date. The multifamily sector increased 17.6% to a rate of 395,000.
The data:
- Year-over-year, combined single-family and multifamily starts are 23.3% lower in the Northeast, 12.9% lower in the Midwest, 7.8% lower in the South and 16.9% lower in the West.
- Overall permits decreased 4.4% to a rate of 1.47 million.
- Single-family permits increased 1.8% to a rate of 965,000, down 13.4% YoY.
- Multifamily permits decreased 14.3% to a rate of 508,000.
- Looking at regional permit data YoY, permits are 22.3% lower in the Northeast, 16.6% lower in the Midwest, 12.7% lower in the South and 17.6% lower in the West.
- The number of apartments under construction is near 1 million units, and will be falling in the months ahead.
The takeaways:
“The uptick in single-family production was somewhat unexpected as our latest builder surveys indicate that starts are likely to weaken in the months ahead due to recent higher mortgage rates that were near 7.6% in mid-October,” said Alicia Huey, chairman of NAHB. “Meanwhile, builders also continue to face persistent labor shortages, a lack of buildable lots and higher financing costs for acquisition and development loans.”
“Despite ongoing challenges in the market, the housing deficit of resale inventory continues to provide some market support for builders,” said NAHB Chief Economist Robert Dietz. “Because of a lack of existing homes in the marketplace, 31% of homes available for sale in August were new construction. This compares with a historical average in the 12% – 14% range. But in another sign that higher interest rates have slowed the market, the number of single-family homes under construction in September was 674,000, which is almost 15% lower than a year ago.”
“According to data released by the U.S. Census Bureau, new single-family construction continued to be solid in September. New single-family starts rose 3.2% from August, and were up 7.0% from a year ago.
Bright MLS Chief Economist Dr. Lisa Sturtevant commented:
“In September, single-family starts fell in the Northeast but posted month-to-month gains in other regions of the country. Slower construction activity in the Northeast could reflect cooler demand as well as challenges builders face in finding availability lots.
“Despite the uptick last month, homebuilders are becoming increasingly anxious about persistently high mortgage rates and cooling demand. To keep buyers interested, many builders have been offering upgrades or buying down mortgage rates. Rising home prices coupled with mortgage rates approaching 8% will mean there will be fewer buyers in the market to entice later this year.
“Multifamily construction (units in buildings with five or more units) were up strongly between August and September, though new multifamily starts are down 31% year-over-year. Apartment construction had been surging over the past year, with a record number of new rental units coming online in many metros across the country, and rents are coming down.
“With more rental inventory and declining rents, it is now a better financial deal to rent instead of buy in many markets in the U.S. The relief some renters are feeling could be short-lived, however, if new apartment construction slows in the fourth quarter.”
