Single-Family Starts Flat in October Amidst Mixed Market Signals

Despite rising mortgage rates and supply chain constraints, the housing market showed resilience in October, with overall housing starts increasing by 1.9% to a seasonally adjusted annual rate of 1.37 million units.

This modest growth was driven by a 6.3% increase in multifamily starts, which offset a slight 0.2% increase in single-family starts.

Demand for New Homes Remains Strong Despite Affordability Challenges

The lack of existing home inventory continues to support demand for new construction, even in the face of higher interest rates.

This is evident in the steady growth of single-family starts, despite a 10.6% decline year-to-date. As Alicia Huey, chairman of the National Association of Home Builders (NAHB), pointed out, “the lack of existing home inventory supported demand for new construction in the fall.”

Industry Faces Headwinds Despite Positive Outlook

Despite the positive signs in the October data, the homebuilding industry still faces challenges.

Elevated construction costs and growing concerns about regulatory burdens are weighing on builders’ sentiment.

NAHB Chief Economist Robert Dietz noted that “builders continue to grapple with elevated construction costs and growing concerns about regulatory costs, such as proposed higher building code requirements connected to FHA mortgages.”

Looking Ahead: Cautious Optimism

Despite these headwinds, NAHB remains cautiously optimistic about the future of the housing market.

With the 10-year Treasury rate now back in the 4.5% range, the association is forecasting gains for single-family home building in the months ahead and an outright gain for construction in 2024.

Regional Highlights

On a regional basis, the housing market is experiencing mixed trends.

Year-to-date, combined single-family and multifamily starts are down 22% in the Northeast, 11.2% in the Midwest, 7.8% in the South, and 15.3% in the West.

Permit data shows a similar pattern, with year-to-date permits down 19.5% in the Northeast, 16.7% in the Midwest, 11.3% in the South, and 15.8% in the West.

Inventory Imbalance Drives Construction Trends

The contrasting trends in single-family and multifamily construction reflect the ongoing inventory imbalance in the housing market.

While there are currently 669,000 single-family homes under construction, down almost 15% from a year ago, there are more than one million apartments under construction, near the highest total since 1973.

This imbalance highlights the need for increased production of single-family homes to meet demand.

The October housing data paint a picture of a market in transition, with mixed signals and underlying challenges.

While demand for new homes remains strong, affordability concerns, supply chain constraints, and regulatory burdens continue to weigh on the industry.

Despite these headwinds, there is cautious optimism for the future, with the potential for single-family home building to pick up in the months ahead.