Single-Family Starts Edge Higher in July but Rising Rate Concerns Persist

A lack of existing inventory and solid demand for housing helped offset rising mortgage rates and push single-family production higher in July, even as builders continue to grapple with elevated construction and financing costs as well as a lack of skilled labor.

Overall housing starts increased 3.9% to a seasonally adjusted annual rate of 1.45 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The July reading of 1.45 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 6.7% to a 983,000 seasonally adjusted annual rate. The three-month moving average (a useful gauge given recent volatility) edged up to 972,000 starts, as charted below. On a year-over-year basis, single-family housing starts are up 9.5% compared to July 2022. However, single-family housing starts are down 17.4% on a year-to-date basis.

The multifamily sector, which includes for-rent apartment buildings and condos, decreased 1.7% to an annualized 469,000 pace for 2+ unit construction in July. The three-month moving average for multifamily construction has been a solid 506,000-unit annual rate. On a year-over-year basis, multifamily construction is down 0.8%. On a year-to-date basis, multifamily starts is down 25% for 2-4 units and is down 1.2% for 5+ units.

On a regional and year-to-date basis, combined single-family and multifamily starts are 17.6% lower in the Northeast, 13.8% lower in the Midwest, 9.4% lower in the South and 16.7% lower in the West.

As an indicator of the economic impact of housing, there are now 678,000 single-family homes under construction. This is 16.9% lower than a year ago. There are currently over 1 million apartments under construction, the highest on record. This is up 15.7% compared to a year ago (867,000). Total housing units now under construction (single-family and multifamily combined) are 0.1% lower than a year ago.

Overall permits increased 0.1% to a 1.44 million unit annualized rate in July. Single-family permits increased 0.6% to a 930,000 unit rate. Single-family permits are also up 1.3% compared to a year ago. Multifamily permits decreased 1.0% to an annualized 512,000 pace, the lowest level since October 2020. Multifamily permits are down 30.8% compared to July 2022, which is a sign of future apartment construction slowing.

Looking at regional permit data on a year-to-date basis, permits are 24.2% lower in the Northeast, 20.3% lower in the Midwest, 15.4% lower in the South and 21.6% lower in the West.