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US single-family starts decline as builders face affordability issues

According to newly released data from the U.S. Department of Housing and Urban Development and the Commerce Department, total housing starts rose 1.5 per cent in October to a seasonally adjusted annual rate of 1.23 million units from an upwardly revised September reading. Year-to-date, new housing starts are 5.6 per cent above their level over the same period last year.

The October reading of 1.23 million is the number of housing units builders would start if they maintained this pace for the next 12 months. Within this overall number, single-family starts edged down 1.8 per cent to 865,000 units. Meanwhile, multifamily starts – which include apartment buildings and condos – rose 10.3 per cent to 363,000.

“This month’s decrease in single-family starts isn’t a surprise given the drop in our builder confidence index,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “Builders are showing caution as mounting housing affordability concerns are forcing some consumers to delay making a home purchase.”

“Single-family starts were strong at the beginning of the year, but weakened this summer and have remained soft,” said NAHB Chief Economist Robert Dietz. “Despite this softness, 2018 construction volume is set to be the best since the downturn. A growing economy and positive demographic tailwinds are supporting housing demand as interest rates rise. However, policymakers should take note of the November decline in builder confidence as a sign that housing affordability conditions will weigh on the housing market going forward.”

Overall permits – which are an indicator of future housing production – registered a 0.6 per cent drop in October to 1.26 million. Single-family permits fell 0.6 per cent to an 849,000 unit pace while multifamily permits dropped 0.5 per cent to an annualized rate of 414,000.

Looking at the regional numbers on a year-to-date basis, combined single-family and multifamily housing starts rose 13.5 per cent in the West and 5.5 per cent in the South. Starts fell 0.6 per cent in the Midwest and 4.8 per cent in the Northeast.

Also on a year-to-date basis, permit issuance rose 7.6 per cent in the South and 3.9 per cent in the West. Permits were down 2.4 per cent in the Midwest and 5 per cent in the Northeast.