Chart: As SF Production Weakens Further, MF Skyrocketing

Single-family housing starts declined further in September as high mortgage rates, ongoing building material production disruptions and flagging demand stemming from rising affordability challenges continue to put a damper on new home production.

Overall housing starts decreased 8.1% to a seasonally adjusted annual rate of 1.44 million units in September, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The September reading of 1.44 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 4.7% to an 892,000 seasonally adjusted annual rate. Year-to-date, single-family starts are down 5.6%, and the pace of single-family permits has declined for seven straight months. The multifamily sector, which includes apartment buildings and condos, decreased 13.2% to an annualized 547,000 pace.

The ongoing decline for single-family construction mirrors weakness for single-family builder sentiment, which has now declined for 10 straight months and stands at half the level of a year ago. The September single-family production level is below a 900,000 annualized rate and the lowest level since May 2020.

On a regional and year-to-date basis, combined single-family and multifamily starts are 3.9% higher in the Northeast, 1.2% lower in the Midwest, 3.6% higher in the South and 3.4% lower in the West.

Overall permits increased 1.4% to a 1.56 million unit annualized rate in September and are up 0.3% on a year-to-date basis. Single-family permits decreased 3.1% to an 872,000 unit rate. The pace of single-family permits has now declined for seven consecutive months. Multifamily permits increased 7.8% to an annualized 692,000 pace.

Looking at regional permit data on a year-to-date basis, permits are 2.8% lower in the Northeast, 1.5% higher in the Midwest, 1.4% higher in the South and 1.6% lower in the West.

As an indicator of the economic impact of housing, there are now 800,000 single-family homes under construction. This is 11% higher than a year ago. However, the count of such homes is down from 828,000 in May, off 3.4% as starts slow. There are currently 910,000 apartments under construction (2+ unit properties), up 27% from a year ago with this number continuing to rise. This is the highest level since the first quarter of February 1974.

Total housing units now under construction (single-family and multifamily combined) is 19% higher than a year ago. The number of single-family units in the construction pipeline is falling and will continue to decline in the months ahead given recent declines in buyer traffic and higher interest rates.