Single-family production showed signs of a gradual upturn in March as stabilizing mortgage rates and limited existing inventory helped to offset stubbornly high construction costs, building labor shortages and tightening credit conditions.
Overall housing starts in March decreased 0.8% to a seasonally adjusted annual rate of 1.42 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
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The March reading of 1.42 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 increased 2.7% to an 861,000 seasonally adjusted annual rate. However, this remains 27.7% lower than a year ago. The multifamily sector, which includes apartment buildings and condos, decreased 5.9% to an annualized 559,000 pace.
“With builder sentiment climbing for four consecutive months and single-family starts continuing to move gradually higher from low levels since the beginning of the year, this indicates that a turning point for single-family construction will occur later this year after declines in 2022,” said Alicia Huey, chairman of the National Association of Home Builders (NAHB) and a custom home builder and developer from Birmingham, Ala. “However, builders are still challenged by ongoing supply-chain issues and a skilled labor shortage.”
“We expect choppiness for single-family construction in the months ahead, with the 2023 data posting significant year-over-year weakness before improving on a sustained basis,” said NAHB Chief Economist Robert Dietz. “The multifamily market softened in March, and we anticipate ongoing declines for apartment construction in the months ahead due to tighter lending conditions in the commercial real estate sector.”
On a regional and year-to-date basis, combined single-family and multifamily starts were 8.3% lower in the Northeast, 34.5% lower in the Midwest, 11.5% lower in the South and 28.2% lower in the West.
Overall permits decreased 8.8% to a 1.41 million unit annualized rate in March. Single-family permits increased 4.1% to an 818,000 unit rate, but are down 29.7% compared to a year ago. Multifamily permits decreased 22.1% to an annualized 595,000 pace.
Looking at regional permit data on a year-to-date basis, permits were 24.5% lower in the Northeast, 25.3% lower in the Midwest, 15.7% lower in the South and 28.1% lower in the West.
The number of single-family homes under construction in March was 716,000, the 10th monthly decline. In March, builders completed 15,000 more homes than began construction, resulting in a decline for the construction pipeline.
There are now 958,000 apartments under construction, which is the highest level since the fall of 1973.