Sluggish Start for 2023 Single-Family Production
Although rising builder sentiment indicates a turning point for housing later this year, lackluster single-family production in January is a sign that the housing sector faces further challenges, as elevated mortgage rates and high construction costs continue to put a damper on the market.
Overall housing starts decreased by 4.5 percent to a seasonally adjusted annual rate of 1.31 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
The January reading of 1.31 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 by 4.3 percent to an 841,000 seasonally adjusted annual rate. The multifamily sector, which includes apartment buildings and condos, decreased by 4.9 percent to an annualized 468,000 pace.
NAHB’s take on the data
“Housing construction weakened in January as ongoing affordability conditions fueled by high mortgage rates and building material costs challenged the market,” says Alicia Huey, chairman of the National Association of Home Builders. “And while a recent two-month upturn in builder sentiment indicates a turning point for single-family construction could take hold in the months ahead, policymakers need to fix the supply chain for building materials to ensure builders can add the additional inventory the housing market desperately needs.”
“As completions continue to outpace construction starts, this marks the eighth straight monthly decline for the number of single-family homes under construction, which has fallen to 752,000,” says Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis. “Meanwhile, the number of apartments under construction stands at the highest level since November 1973, which means a slowdown for apartment starts is approaching.”
Regional starts decrease
On a regional basis compared to the previous month, combined single-family and multifamily starts were 42.2 percent lower in the Northeast, 25.9 percent lower in the Midwest, 7.3 percent higher in the South and 5.5 percent higher in the West.
Overall permits increased by 0.1 percent to a 1.34 million unit annualized rate in January. Single-family permits decreased by 1.8 percent to a 718,000 unit rate. Multifamily permits increased by 2.5percent to an annualized 621,000 pace.
Looking at regional permit data compared to the previous month, permits were 7.8 percent lower in the Northeast, 1.7 percent higher in the Midwest, 3.0 percent higher in the South and 4.6 percent lower in the West.