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2023 off to a sluggish start for U.S. single-family production: NAHB

Although rising builder sentiment indicates a turning point for housing later this year, lackluster single-family production in January is a sign that the housing sector faces further challenges, as elevated mortgage rates and high construction costs continue to put a damper on the market.

Overall housing starts decreased 4.5 per cent to a seasonally adjusted annual rate of 1.31 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

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 per cent to an 841,000 seasonally adjusted annual rate. The multifamily sector, which includes apartment buildings and condos, decreased 4.9 per cent to an annualized 468,000 pace.

“Housing construction weakened in January as ongoing affordability conditions fueled by high mortgage rates and building material costs challenged the market,” said Alicia Huey, chairman of the National Association of Home Builders (NAHB) and a custom home builder and developer from Birmingham, Ala. “And while a recent two-month upturn in builder sentiment indicates a turning point for single-family construction could take hold in the months ahead, policymakers need to fix the supply chain for building materials to ensure builders can add the additional inventory the housing market desperately needs.”

“As completions continue to outpace construction starts, this marks the eighth straight monthly decline for the number of single-family homes under construction, which has fallen to 752,000,” said Danushka Nanayakkara-Skillington, NAHB’s assistant vice-president for forecasting and analysis. “Meanwhile, the number of apartments under construction stands at the highest level since November 1973, which means a slowdown for apartment starts is approaching.”

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

Overall permits increased 0.1 per cent to a 1.34 million unit annualized rate in January. Single-family permits decreased 1.8 per cent to a 718,000 unit rate. Multifamily permits increased 2.5 per cent to an annualized 621,000 pace.

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