RealTrends and Inman News
Annualized start rate of 1.724 million still up 14.6% year over year.
Strong multifamily construction starts continued to bolster overall housing starts in April. According to a report released Wednesday by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, in April, overall housing starts fell 0.2% month over month, to a seasonally annualized rate of 1.724 million units.
Despite the slight decline from March, the rate is 14.6% higher than it was in April 2021.
The multifamily sector, which includes apartments and condos, increased 16.8% month over month, to a rate of 612,000 units. Meanwhile single-family housing starts dropped 7.3% from the month prior to a rate of 1.1 million units.
“Today’s housing starts report is more evidence that the single-family market is slowing,” said National Association of Homebuilders chief economist Robert Dietz. “While single-family starts are up 4.1% on a year-to-date basis, we’re expecting flat conditions for the year and a decline in 2023 as housing affordability challenges, in the form of higher mortgage rates and construction costs, continues to worsen housing affordability conditions.”
Experts blamed the drop in single-family housing starts on rising interest rates and continued supply chain issues. The same two concerns also were cited as contributing factors behind diminishing homebuilder confidence. In the most recent National Association of Homebuilders/Wells Fargo Housing Market Index report, homebuilder sentiment fell eight points from the previous month to 69 points, its lowest reading since June 2020.
Homebuilders also are dealing with a construction backlog. The total rate of housing completions in April was 1.295 million, down 5.1% from March and down 8.6% compared to a year ago. Single-family completions saw a 4.9% month-over-month decrease to 1.001 million, while multifamily completions dropped 6.6% from March to 281,000.
Compounding the issue is the number of building permits issued, which was up 3.1% year over year nationwide in April to 1.819 million, thanks to multifamily permits rising 16.3% year over year to 656,000 units. Meanwhile, single family permits dropped 3.6% year over year to 1.11 million.
“Builders still have a backlog of uncompleted homes to get through before they can break ground on new projects,” Odeta Kushi, First American’s deputy chief economist, said in a statement. “The number of single-family homes authorized but not started was nearly 8.5% higher year over year in April.”
Still, experts remain optimistic the demand for new homes will remain strong.
“Housing demand is softening, but that means more balance is coming to the housing market. The housing market of 2020 and 2021 was the exception, not the norm,” Kushi said. “The lack of existing-home inventory may worsen as rates rise. Existing owners are ‘rate locked-in’ when their existing rate is below the prevailing market rate. This places even more importance on homebuilding. You can’t buy what’s not for sale, but you can build it.”
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The slowdown in construction activity comes as the average for a 30-year loan rose to 5.3% last week, up from 2.49% a year ago, according to new data released by the US Census Bureau.
New residential construction slowed in April as higher interest rates hampered affordability and demand waned for new homes, according to data released Wednesday by the U.S. Census Bureau.
New construction permits were at a seasonally adjusted rate of 1,819,000 in April, a 3.2 percent decline from March, but up 3.1 percent from April 2021, according to the data.
Privately owned housing starts clocked in at a seasonally adjusted 1,724,000, down 0.2 percent from the previous month, but 14.6 percent above where they were one year ago, according to the Census Bureau. Single-family housing starts, meanwhile, were at 1,100,000, down 7.3 percent from the March rate.
Housing completions were at a seasonally adjusted 1,295,000, which was 5.1 percent less than the month before, and down 8.6 percent from April 2021.
The slowdown in construction activity comes as the average for a 30-year loan rose throughout April and clocked in at around 5.3 percent last week, up from just 2.49 percent a year ago. The construction starts data was released Wednesday on the heels of a Mortgage Bankers Association report on the same day indicating demand for purchase loans had slipped for the first time in three weeks, even as mortgage rates backed down from 2022 highs.
After rising more than two full percentage points this year — from 3.409 percent on Jan. 3 to a 2022 peak of 5.593 percent on May 6 — rates on 30-year fixed-rate mortgages have come down 11 basis points, to 5.479 percent as of Tuesday, according to the Optimal Blue Mortgage Market Indices (OBMMI).
The combination of skyrocketing inflation, rents, and housing prices has left Americans with less money in their pockets, while some signs are pointing to a gradual easing on both the supply and demand side of the housing market — though it remains frenzied for now.
Builder confidence hit the lowest point since June 2020 amid a decline in consumer demand brought on by rising interest rates, according to a report released by the National Association of Home Builders on Tuesday.
Demand for new homes will likely continue to wane, experts predict.
“New residential construction is running into noticeable headwinds as the Federal Reserve’s monetary tightening, while aimed at curbing runaway inflation, increasingly pushes borrowing costs out of reach for millions of buyers,” Realtor.com Senior Economist George Ratiu said in a statement. “With mortgage rates surging over 200 basis points in the past four months alone, many home shoppers are hitting a hard ceiling on their budgets and demand for new homes is waning as a result.