NAHB: Solid Growth in Single-Family Starts Recorded in May 2023

Single-family starts reached an 11-month high in May thanks to a combination of low existing inventory, strong demand, and advancing supply chains.

According to a study from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau, the total number of housing starts in May jumped 21.7% to a seasonally adjusted annual rate of 1.63 million units.

The number of housing units builders would start in May, 1.63 million starts, if development continued at this rate for the following 12 months.

Single-family starts within this total number grew 18.5% to a 997,00 seasonally adjusted annual pace.

This is still 6.6% less than it was a year ago, though. Apartment complexes and condos are included in the multifamily sector, which grew by 27.1% to an annualized pace of 634,000.

“Mirroring rising builder sentiment, single-family permits and starts increased in May as builders boosted production to meet unmet demand,” said Alicia Huey, a Birmingham, Alabama-based developer and head of the National Association of Home Builders (NAHB).

“Despite elevated interest rates that make the cost of housing more expensive, the lack of existing home inventory in most markets is leading to increased demand for new construction.”

“The May housing starts data and our latest builder confidence survey both point to a bottom forming for single-family residential construction earlier this year,” stated Robert Dietz, Chief Economist for NAHB.

“There have been some improvements to the supply-chain, although challenges persist for items like electrical transformers and lot availability. However, due to weakness at the start of the year, single-family housing starts are still down 24% on a year-to-date basis.”

Single-family completions are down just 1.2% as projects begun at the end of the previous year come to completion, despite single-family starts being down 24% year to date. Notably, the May housing data reveals that while the number of flats under construction has increased by 17% to 994,000—the highest level since September 1974—the number of single-family homes under construction has decreased by 16% from a year earlier to 695,000.

Also, according to Dietz, the May housing figures point to a rise in inflation.

“Additional housing supply is good news for inflation data, because more inventory will help reduce shelter inflation, which is now a leading source of growth for the CPI.”

Combining single-family and multifamily starts, regionally and year to date, the Northeast is 11.0% lower, the Midwest is 15.0% lower, the South is 12.3% lower, and the West is 24.7% lower.

Overall permits increased 5.2% to a 1.49 million unit annualized rate in May.

Single-family permits increased 4.8% to an 897,000 unit rate, but are down 25.5% year-to-date. Multifamily permits increased 5.9% to an annualized 594,000 pace.

Looking at regional permit data on a year-to-date basis, permits are 21.1% lower in the Northeast, 24.7% lower in the Midwest, 16.5% lower in the South, and 24.1% lower in the West.