Single-family production fell back after four straight monthly gains as elevated construction costs and rising mortgage rates led to a reduction in home building activity and affordability conditions worsened for home buyers, according to the National Association of Home Builders (NAHB).
Overall housing starts in June decreased 8% to a seasonally adjusted annual rate of 1.43 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
The June reading of 1.43 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 7% to a 935,000 seasonally adjusted annual rate. Single-family starts are also 7.4% lower than a year ago. The multifamily sector, which includes apartment buildings and condos, decreased 9.9% to an annualized 499,000 pace.
“Housing starts posted a monthly decline in June as tightening monetary policy helped push mortgage rates up more than a quarter-point over the past month,” said Alicia Huey, chairman of the NAHB and a custom home builder and developer from Birmingham, Ala. “Policymakers need to remove regulatory bottlenecks that impede the housing industry’s ability to increase the production of quality, affordable housing.”
Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis, added, “While builders have slowed construction activity as interest rates have approached 7%, we anticipate mortgage rates will stabilize later this year in anticipation of the end of Federal Reserve’s tightening cycle. In turn, this could bring home buyers back to the market as affordability conditions improve. And in another sign of cautious builder optimism, single-family permits registered their highest pace since June 2022.”
The number of single-family units under construction is down 17% compared to a year ago at 688,000. Meanwhile, the number of apartments under construction increased to 994,000, the highest total since May 1973.
On a regional and year-to-date basis, combined single-family and multifamily starts are 13.9% lower in the Northeast, 19.4% lower in the Midwest, 11.5% lower in the South and 21% lower in the West.
Overall permits decreased 3.7% to a 1.44 million unit annualized rate in June. Single-family permits increased 2.2% to a 922,000 unit rate but are down 21.5% year-to-date. Multifamily permits decreased 12.8% to an annualized 518,000 pace, the lowest level since October 2020.
Looking at regional permit data on a year-to-date basis, permits are 23.4% lower in the Northeast, 20.8% lower in the Midwest, 16.2% lower in the South and 23.6% lower in the West.