2023 Off to A Sluggish Start for Single-Family Production

Due to elevated mortgage rates and high construction costs, overall housing starts decreased 4.5% to a seasonally adjusted annual rate of 1.31 million units in January, according to data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. Although rising builder sentiment indicates a turning point for housing later this year, the volatility in the 10-year Treasury rate in recent weeks is a sign that the housing sector will face further challenges in the coming months.

The January reading of 1.31 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 decreased 4.3% to an 841,000 seasonally adjusted annual rate. The three-month moving average (a useful gauge given recent volatility) edged down to 842,000 starts, as charted below. On a year-over-year basis, single-family housing starts are down 27.3% compared to January 2022.

The multifamily sector, which includes for-rent apartment buildings and condos, decreased 4.9% to an annualized 468,000 pace for 2+ unit construction in January. The three-month moving average for multifamily construction has been a solid 524,000-unit annual rate. On a year-over-year basis, multifamily construction is down 8.1%.

On a regional basis compared to the previous month, combined single-family and multifamily starts are 42.2% lower in the Northeast, 25.9% lower in the Midwest, 7.3% higher in the South and 5.5% higher in the West.

As an indicator of the economic impact of housing, there are now 752,000 single-family homes under construction. This is 4.8% lower than a year ago. There are currently 948,000 apartments under construction, the highest levels since December 1973, and  up 24.2% compared to a year ago (763,000). Total housing units now under construction (single-family and multifamily combined) are 9.5% higher than a year ago.

Overall permits increased 0.1% to a 1.34 million unit annualized rate in January and are down 27.3% compared to January 2022. Single-family permits decreased 1.8% to a 718,000 unit rate and are down 40.0% compared to January 2022. Multifamily permits increased 2.5% to an annualized 621,000 pace but are down 3.6% compared to January 2022.

Looking at regional permit data compared to the previous month, permits are 7.8% lower in the Northeast, 1.7% higher in the Midwest, 3.0% higher in the South and 4.6% lower in the West.


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