Single-family housing starts dropped in June as a result of raised interest rates for mortgages and construction and development loans, despite overall housing starts jumping 3% to a seasonally adjusted rate of 1.35 million units, according to new data provided by the U.S. Department of Housing and Urban Development (HUD) and the U.S. Census Bureau.
In a release, the National Association of Home Builders (NAHB) stated that “(t)he June reading of 1.35 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months.”
This overall number indicates that single-family starts dropped 2.2% from an upwardly revised May figure to a seasonally adjusted rate of 980,000. Delving deeper into the stats, year-to-date data show that single-family starts were still up a modest 5.4% year-over-year.
Apartments and condos spiked 19.6% to an annualized pace of 373,000 from last month, according to NAHB, but starts for properties with five or more units are down 23.4% year-over-year, according to the HUD and Census Bureau data.
Bright MLS Chief Economist Dr. Lisa Sturtevant explained in a statement that a slowdown in apartment construction is not a shock, because in 2023, “there were record numbers of apartments delivered in some markets across the U.S., leading developers to pull back on bringing new units to the market.
“Last year, rents in some markets fell, and property managers were offering rent and other concessions to attract renters,” she added.
“Lower single-family starts are in line with our latest builder surveys, which show that while builders are concerned about the current high interest rate environment, they believe that mortgage rates will moderate in the coming months and lead to higher construction in the latter part of 2024,” said NAHB Chairman Carl Harris.
“With better inflation data, the Federal Reserve is expected to begin rate reductions later this year, and an improving interest rate environment will help buyers as well as builders and developers who are contending with tight lending conditions and high interest rates,” explained NAHB Chief Economist Robert Dietz in a statement. “And with home inventory at a relatively low 4.4 months’ supply, builders are prepared to increase production in the months ahead. NAHB survey data of forward-looking builder sales expectations saw a gain in July.”
Regionally and year-to-date, combined single and multifamily starts are 9.9% lower in the Northeast, 3.4% lower in the Midwest, 3.5% lower in the South and 0.7% higher in the West, per NAHB.
Regarding new construction permits, the new data showed a 3.4% increase to a 1.45 million unit annualized rate in June. More specifically, single-family permits dropped 2.3% to a 934,000 unit rate, and multifamily permits increased 15.6% to an annualized pace of 512,000.
The total number of single-family homes and apartments under construction is the lowest figure since January 2022: 1.56 million.
“The number of permits for the construction of single-family homes…was off by 1.3% compared to a year ago. The balance between new and existing homes in the for-sale inventory, which had been strongly skewed toward new homes over the past few years, is likely going to tilt more toward existing homes in the second half of the year,” said Sturtevant.
