Dec. single-family starts rose double digits to 11.3% as multifamily slid 19%. Based on permits issued, however, NAHB expects less dramatic numbers in the future.
WASHINGTON – Single-family housing starts posted a double-digit percentage gain in December, but production is running well below a rate of 1 million units annually, indicating ongoing weakness in the housing market as high construction costs and elevated interest rates continue to present affordability challenges.
Led by a decline in multifamily production, overall housing starts decreased 1.4% 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 reading of 1.38 million starts is the number of housing units builders would begin if development kept the same pace for the next 12 months.
However that overall number reflected a dramatic increase in single-family starts that was offset by a decline in multifamily housing starts.
In December, single-family starts increased 11.3% to a 909,000 seasonally adjusted annual rate, though it’s still down 25% year-to-year (December 2021). The multifamily sector, which includes apartment buildings and condos, decreased 19% to a 473,000 pace.
Starts down 3% for all of 2022
Total housing starts for 2022 were 1.55 million, a 3% decline from the 1.60 million total in 2021.
Single-family starts in 2022 totaled 1.01 million, down 10.6% compared to 2021, and multifamily starts were up 14.5% compared to the previous year. In 2022, multifamily also exceeded a 500,000 annual pace for the first time since the Great Recession.
“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 (NAHB). However, he also expects “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 homebuyers.”
On a regional and year-to-year basis, combined single-family and multifamily starts are 5% higher in the Northeast, 5.7% lower in the Midwest, 1.6% lower in the South and 7.2% lower in the West.
Overall permits decreased 1.6% to a 1.33 million unit annualized rate in December and are down 29.9% compared to December 2021. Single-family permits decreased 6.5% to a 730,000 unit rate and are down 34.7% compared to December 2021. Multifamily permits increased 5.3% to a 600,000 pace.
Looking at regional permit data on a year-to-year basis, permits are 13.6% lower in the Northeast, 3.4% lower in the Midwest, 2.4% lower in the South and 8.3% lower in the West.
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