Single-Family Production Continues to Decline, Multifamily Permits Weakening

Single-family housing starts continued to fall in November, with the pace of construction down 32% since February when mortgage rates began to rise. The housing market continues to weaken because stubbornly high construction costs and elevated interest rates are harming housing affordability. And with the count of multifamily units under construction reaching a near 50-year high, multifamily permit growth is weakening.

Overall housing starts decreased 0.5% to a seasonally adjusted annual rate of 1.43 million units in November, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The November reading of 1.43 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 4.1% to an 828,000 seasonally adjusted annual rate. Year-to-date, single-family starts are down 9.4%. Single-family starts are down on falling affordability conditions and lingering supply-chain issues, particularly for electrical transformers.

For the last four months, there have been more single-family homes that completed construction than have been started over the past four months, per the non-seasonally adjusted estimates. The November data shows there were 25,500 more single-family homes completed than started for the month, thus pushing down the number of new homes under construction.

Overall permits decreased 11.2% to a 1.34 million unit annualized rate in November. Single-family permits decreased 7.1% to a 781,000 unit rate.

Multifamily starts, which includes apartment buildings and condos, increased 4.9% to an annualized 599,000 pace in November. Multifamily permits decreased 16.4% to an annualized 561,000 pace, the lowest reading for apartment permits since September 2021. We are forecasting declines for apartment construction in 2023 due to the large amount of supply in the construction pipeline, as well as tightening commercial real estate finance conditions.

The number of multifamily units under construction for November was 932,000; this is the highest number since December 1973. The number of single-family units under construction has fallen for six consecutive months, declining to 777,000 homes in November.

On a regional and year-to-date basis, combined single-family and multifamily starts are 1.3% higher in the Northeast, 0.8% higher in the Midwest, 0.6% higher in the South and 7.0% lower in the West. Looking at regional permit data on a year-to-date basis, permits are 5.6% lower in the Northeast, 0.5% lower in the Midwest, 0.6% lower in the South and 6.5% lower in the West.