December Housing Starts Still Down on Rising Costs: NAHB

The report said the loss comes as production is running well below a rate of 1 million units annually. The decline is driven by elevated mortgage rates, rising construction costs, and waning demand stemming from the drag of high home costs on single-family housing production.

The December reading of 1.38 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Single-family starts, a component of this total, increased 11.3% to a seasonally adjusted annual rate of 909,000, but are down 25% compared to December 2021.

The multi-family — including apartment buildings and condos — decreased 19% to an annualized 473,000 pace.

“Even though single-family starts are up on a monthly basis, permits indicate that the housing market will slow down further in 2023,” said Jerry Konter, NAHB’s chairman and a home builder and developer from Savannah, Ga. “We expect a sustainable decline for mortgage rates in the second half of this year, which should lead to a housing recovery in 2024.”

For the year, total housing starts were 1.55 million, a 3% decline from the 1.60-million total from the same year-ago period. Single-family starts in 2022 totaled 1.01 million, down 10.6% from the previous year. Multi-family starts last year were up 14.5% compared to 2021 and exceeded a 500,000 annual pace for the first time since the Great Recession, the report said.

On a regional year-to-date basis, combined single-family and multi-family starts varied. The Northeast region was up 5%, while the Midwest (-5.7%), South (-1.6%), and the West (-7.2%) all declined.

“The decline in single-family permits indicates that builders are slowing construction activity as interest rates have spiked in recent months,” said Danushka Nanayakkara-Skillington, NAHB’s assistant VP for forecasting and analysis. “Starts began on a strong footing in early 2022 but fell back in the latter part of the year as higher costs led to a pause in home building activity and affordability conditions worsened for home buyers.”

Overall permits slipped 1.6% to a 1.33-million-unit annualized rate in December, and were down 29.9% year on year (YoY). Single-family permits were down 5.6% to a 730,000-unit rate, and down 34.7% YoY. Multi-family permits increased by 5.3% to an annualized 600,000 pace.

Looking at regional permit data on a YTD basis, permits are down 13.6% in the Northeast, 3.4% lower in the Midwest, 2.4% lower in the South, and down 8.3% in the West.

By David Schollaert, david@steelmarketupdate.com