Multifamily starts and permits surge ahead by double digits on a year-over-year basis.
Housing starts retreated again in October as home builders continue to be met by reluctant home buyers hindered by inflation and higher mortgage rates.
Combined starts in October were at a seasonally adjusted annual rate of 1.425 million, declining 4.2% from the revised September estimate of 1.488 million, the U.S. Census Bureau and the U.S. Department of Housing and Urban Development jointly reported this morning.
The latest total housing starts figure is also 8.8% below the October 2021 rate of 1.563 million.
Single-family starts for the month decreased by 6.1% to a rate of 855,000 compared to the revised September figure of 911,000.
“This will be the first year since 2011 to post a calendar year decline for single-family starts,” said NAHB Chief Economist Robert Dietz. “We are forecasting additional declines for single-family construction in 2023, which means economic slowing will expand from the residential construction market into the rest of the economy.”
The rate for units in buildings with five units or more was 556,000, slipping 0.5% from a revised September rate of 559,000. But the latest number is 17.3% above a rate of 474,000 for the same period a year ago.
Permits in October fell 2.4% to a seasonally adjusted annual rate of 1.526 million in comparison to the revised September rate of 1.564 million. Total permits in October are also 10.1% below the October 2021 rate of 1.698 million.
Single‐family permits for the month were at a rate of 839,000, which is 3.6% below the revised September figure of 870,000.
Authorizations of units in buildings with five units or more were at a rate of 633,000 in October, sliding 1.9% from the prior month but rising 11.2% from the same period a year ago.
“Mirroring ongoing falloffs in builder sentiment, builders are slowing construction as demand retreats due to high mortgage rates, stubbornly elevated construction costs and declines for housing affordability,” said Jerry Konter, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Savannah, Ga.
Builder confidence in the market for newly-built single-family homes dropped five points to 33, according to the latest NAHB/Wells Fargo Housing Market Index (HMI) released on Nov. 16.
This is the lowest confidence reading since June 2012, with the exception of the onset of the pandemic in the spring of 2020.
The NAHB attributes the low builder sentiment to increased interest rates, high building material costs, and declining housing affordability conditions.
Despite affordability issues and a major slowdown in residential construction, a housing supply challenge could be on the horizon.
“Even as days on the market are lengthening, overall housing inventory still remains near historic lows," said Lawrence Yun, chief economist of the National Association of Realtors. "New listings are actually lower compared to the same period a year ago. That means once the gate opens a bit for home buyers, we could again face a housing shortage."
Yun says more new home construction is needed, as well as more rehabilitation of disused buildings into residential units.
Here’s how housing starts and permits performed on a regional basis in October:
In the Northeast, total starts dropped 34.7% for the month and decreased 15.1% on a year-over-year basis. Single-family starts fell 11.9% last month and slipped 1.9% compared to a year ago. Total permits are down 7% for the month and 11.8 percent compared to the same period in the prior year. Single-family permits are 12.1% for the month and 16.4% from 2021.
In the Midwest, total starts tumbled 11.1% for the month and 13.6% compared to a year ago. Single-family starts are down 12.6% for October and 14.6% from the same period last year. Total permits and single-family permits were flat for the month flat. Combined permits dropped 10.3% for the month as single-family permits declined 18.7% from a year ago.
Total starts in the South climbed 6.7% for the month while single-family starts edged down 1.5%. On a year-over-year basis, combined starts were down 1.1% and staggered downward by 16.8%. Overall permits increased 2.4% for the month but single-family permits decreased 2.7%. Compared to a year ago, combined permits are down 3% for the month with single-family permits falling 20.4% from a year ago.
The West saw total starts retreat 10.6% in October as single-family starts fell 12.6% for the month. On a year-over-year basis, combined starts are down 19.6% and single-family starts dropped 36.4% Total permits for the month are down nearly 13% as single-family permits saw a 5.6% drop. In comparison to a year ago, permits took a big hit with combined authorizations declining 24.1% and single-family permits plunging 30.1%.