NAHB: Single-Family Starts Improve in March

In March, single-family production showed signs of a steady upturn as mortgage rates stabilized and existing inventory was limited, helping to offset stubbornly high construction costs, building labor shortages, and tightening credit conditions.

According to a report from the US Department of Housing and Urban Development and the US Census Bureau, overall home starts fell 0.8% in March to a seasonally adjusted annual pace of 1.42 million units.

The March reading of 1.42 million starts represents the number of dwelling units that builders would begin if construction continued at this rate for the next 12 months.

Single-family starts increased 2.7% year on year to an 861,000 seasonally adjusted annual rate.

Yet, this is still 27.7% less than a year earlier. The multifamily sector, which includes apartment buildings and condos, fell 5.9% year on year to 559,000 units.

“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,” Alicia Huey, head of the National Association of Home Builders (NAHB) and a Birmingham, Alabama-based custom home builder and developer, stated.

“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,” NAHB Chief Economist Robert Dietz said.

“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.”

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 year to date.

In March, overall permits fell 8.8% to a 1.41 million unit yearly rate.

Single-family permits grew 4.1% to 818,000 units, but are down 29.7% year on year.

Multifamily permits fell 22.1% to a yearly rate of 595,000.

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 year to date, according to regional permit data.

The number of single-family homes under construction in March was 716,000, marking the tenth consecutive monthly decrease.

Builders built 15,000 more homes in March than began construction, resulting in a decrease in the construction pipeline.

The number of units under construction has risen to 958,000, the greatest level since the fall of 1973.