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6 BuildersOutlook 2024Issue6
NAHB :
Housing Starts Retreat in May
Single-family and multifamily housing starts fell in May as high interest rates for construction and development loans and mortgage rates held back both housing supply and demand .
Overall housing starts fell 5.5 % in May to a seasonally adjusted annual rate of 1.28 million units , according to a report from the U . S . Department of Housing and Urban Development and the U . S . Census Bureau .
The May reading of 1.28 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 5.2 % to a 982,00 seasonally adjusted annual rate . However , on a year-to-date basis , single-family starts are up 18.8 %, albeit off weak early 2023 data . The multifamily sector , which includes apartment buildings and condos , declined 6.6 % to an annualized 295,000 pace . This is the lowest pace for apartment construction since April 2020 .
“ Overall lower housing production correspond with our latest industry surveys , which show builders are concerned with a high interest
environment that is making it harder to get acquisition , development and construction loans to increase home building activity ,” said Carl Harris , chairman of the National Association of Home Builders ( NAHB ) and custom home builder from Wichita , Kan . “ Higher rates for builder and developer loans , along with ongoing supply-side challenges regarding construction labor and buildable lots , are acting as headwinds for new home and apartment construction .”
On the demand side , mortgage rates averaged 7.06 % in May per Freddie Mac , the highest reading since November 2023 . This high interest rate environment is causing many potential buyers to remain on the sidelines .
“ It is not just the single-family market that is experiencing challenges . The three-month moving average for multifamily starts is the lowest since the fall of 2013 as the multifamily development deceleration continues ,” said NAHB Chief Economist Robert Dietz .
The ratio of multifamily completions to starts ( the total number of apartments completing construction compared to those starting construction ) was 1.8 in May , tied with April for the highest ratio since Covid . “ This ratio was 0.6 in April 2022 when many more apartments were starting construction compared to finishing construction , demonstrating the significant reversal for the multifamily construction pipeline ,” said Dietz .
The number of apartments under construction is now down to 914,000 , the lowest count since Sept 2022 and down 11 % since the peak rate in July 2023 .
On a regional and year-to-date basis , combined single-family and multifamily starts are 22.2 % lower in the Northeast , 8.0 % lower in the Midwest , 2.3 % lower in the South and 2.6 % higher in the West . Declines for multifamily construction are driving the weakness for those regions showing year-to-date total housing starts declines .
Overall permits decreased 3.8 % to a 1.39-million-unit annualized rate in May . Single-family permits decreased 2.9 % to a 949,000 unit rate ; this is the lowest pace since June 2023 . Multifamily permits decreased 5.6 % to an annualized 437,000 pace .
Looking at regional data on a year-to-date basis , permits are 0.7 % higher in the Northeast , 5.3 % higher in the Midwest , 0.8 % higher in the South and 1.5 % lower in the West .