Single-family housing starts posted a double-digit percentage gain in December, but production is running well below a rate of one million units annually, indicating ongoing weakness in the housing market as high construction costs and elevated interest rates continue to present affordability challenges, according to the National Association of Home Builders.
The data
Led by a decline in multifamily production, overall housing starts decreased 1.4 percent to a seasonally adjusted annual rate of 1.38 million units in December, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
The December reading of 1.38 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 increased 11.3 percent to a 909,000 seasonally adjusted annual rate, but are down 25 percent compared to December 2021. The multifamily sector, which includes apartment buildings and condos, decreased 19 percent to a 473,000 pace.
Total housing starts for 2022 were 1.55 million, a three percent decline from the 1.60 million total from 2021. Single-family starts in 2022 totaled 1.01 million, down 10.6 percent from the previous year. Multifamily starts (five-plus) in 2022 were up 14.5 percent compared to the previous year and exceeded a 500,000 annual pace for the first time since the Great Recession.
What NAHB says
“Even though single-family starts are up on a monthly basis, permits indicate that the housing market will slow down further in 2023,” says Jerry Konter, chairman of the National Association of Home Builders. “We expect a sustainable decline for mortgage rates in the second half of this year, which should lead to a housing recovery in 2024.”
“The decline in single-family permits indicates that builders are slowing construction activity as interest rates have spiked in recent months,” says Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis. “Starts began on a strong footing in early 2022 but fell back in the latter part of the year as higher costs led to a pause in home building activity and affordability conditions worsened for home buyers.”
Regional and year-to-year breakdown
On a regional and year-to-year basis, combined single-family and multifamily starts are five percent higher in the Northeast, 5.7 percent lower in the Midwest, 1.6 percent lower in the South and 7.2 percent lower in the West.
Overall permits decreased 1.6 percent to a 1.33 million unit annualized rate in December and are down 29.9 percent compared to December 2021. Single-family permits decreased 6.5 percent to a 730,000 unit rate and are down 34.7 percent compared to December 2021. Multifamily permits increased 5.3 percent to a 600,000 pace.
Looking at regional permit data on a year-to-year basis, permits are 13.6 percent lower in the Northeast, 3.4 percent lower in the Midwest, 2.4 percent lower in the South and 8.3 percent lower in the West.
