Higher mortgage rates averaging above 7% slowed single-family production in August, as builders also faced supply-side challenges such as rising construction costs, a shortage of skilled labor, and a scarcity of buildable lots.
According to a report from the U.S. Census Bureau, overall housing starts fell 11.3% in August to a seasonally adjusted annual rate of 1.28 million units, led by a sharp decline in multifamily production. Department of Housing and Urban Development, as well as the U.S. The Census Bureau.
The August reading of 1.28 million starts represents the number of housing units that builders would begin if construction continued at this rate for the next 12 months. Within this total, single-family starts fell 4.3% to a seasonally adjusted annual rate of 941,000. Single-family housing starts are up 2.4% year on year. The multifamily sector, which includes apartment buildings and condos, fell 26.3% to 342,000 units on an annualized basis.
“High mortgage rates above 7% combined with low resale inventory and higher home prices are slowing housing production, as many first-time home buyers and younger households are struggling to purchase an affordable home,” Alicia Huey, NAHB chairman and custom home builder and developer from Birmingham, Ala. “With high mortgage rates sending buyers to the sidelines, and a nationwide shortage of 1.5 million units, we need to increase the housing supply to get this market back into balance to meet the pent-up demand for when market conditions improve.”
“Despite higher demand for new construction stemming from a lack of resale inventory, home builders are feeling pessimistic about the housing market because of elevated mortgage rates hovering above 7%,” NAHB assistant vice president for forecasting and analysis Danushka Nanayakkara-Skillington said. “Unfortunately, we expect mortgage rates to remain at higher levels as the Federal Reserve is likely to increase rates one more time later this quarter.”
The number of single-family homes under construction has dropped 16.3% year on year to 676,000. In the meantime, the total number of apartments under construction has risen to 1.01 million.
Single-family and multifamily starts are 22.8% lower in the Northeast, 13.6% lower in the Midwest, 8.8% lower in the South, and 16.5% lower in the West year to date.
In August, overall permits increased 6.9% to a 1.54 million unit annualized rate. The number of single-family permits increased by 2% to 949,000 units. Single-family permits are also up 7.2% year on year. Multifamily permits increased 15.8% year on year to 594,000.
Permits are 22.9% lower in the Northeast, 17.2% lower in the Midwest, 13.3% lower in the South, and 18.2% lower in the West year to date, according to regional permit data.
