WASHINGTON – New single-family home construction and permits fell in March on higher-than-expected interest rates and stubborn inflation readings, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
Builders have also been stymied by higher supply-side costs and tighter lending conditions, the National Association of Home Builders (NAHB) said.
“Builders are grappling on several fronts as the inflation fight continues,” said Carl Harris, NAHB chairman said. “Higher interest rates are increasing the cost of housing for prospective home buyers and raising the development and construction cost for builders of homes and apartments. At the same time, shelter inflation is rising faster than overall prices due to supply-side challenges.”
Overall housing starts decreased 14.7% in March to a seasonally adjusted annual rate of 1.32 million units. The March reading of 1.32 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 12.4% to a 1.02 million seasonally adjusted annual rate. The multifamily sector, which includes apartment buildings and condos, decreased 21.7% to an annualized 299,000 pace.
“Single-family starts were down in March as interest rates increased and multifamily production fell as builders faced tighter financing conditions,” said Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis. “And with single-family permits also down in March, single-family production will likely decline again in April.”
On a regional and year-to-date basis, combined single-family and multifamily starts are 21.7% lower in the Northeast, 6.0% higher in the Midwest, 0.4% lower in the South and 14.0% higher in the West.
Overall permits decreased 4.3% to a 1.46 million unit annualized rate in March. Single-family permits decreased 5.7% to a 973,000 unit rate. Multifamily permits decreased 1.2% to an annualized 485,000 pace.
Looking at regional data on a year-to-date basis, permits are 34.5% higher in the Northeast, 11.3% higher in the Midwest, 0.9% lower in the South and 1.0% higher in the West.
The number of single-family homes under construction totaled 689,000 in March, down 2.7% from a year ago. The number of apartments under construction totaled 957,000 in March, down 1.6% from a year ago.
While apartment construction starts are down, the number of completed units entering the market is rising due to prior elevated construction levels. The pace of completions for apartments in buildings with five or more units is up 27.4% for the first quarter of 2024 compared to the first quarter of 2023. A higher pace of completions in 2024 for multifamily construction will place some downward pressure on rent growth.
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