The residential construction lull that has prevailed over the latter half of 2022 continued in November, with single-family building activity sinking to its lowest level in two and a half years.
The newest monthly homebuilding report jointly released by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development revealed a seasonally adjusted annual rate of 1.43 million housing starts in November. That’s down 0.5% from October — a smaller decline than many expected.
But the headline figure was propped up by multifamily construction, which saw a gain of 4.9% during the month to claw back to a pace of 599,000 starts after two straight months of decreases. Multifamily building has been resilient this year, buttressed by strong rental housing demand as higher mortgage rates have kept many would-be homebuyers on the sidelines.
Single-family starts, on the other hand, fell 4.1% from October to a rate of 828,000 units. November’s monthly decline was greater than October’s, and the slide brought single-family construction starts to their lowest level since May 2020, when the housing market was knee-deep in the opening throes of the COVID-19 pandemic.
“It’s no surprise that single-family starts are running at their lowest level since May 2020, given that builder sentiment has dropped for 12 consecutive months as builders remain fixated on rising building material costs and supply chain bottlenecks,” said Jerry Konter, chairman of the National Association of Home Builders (NAHB). In particular, builders were seeing a shortage of electrical transformers, Konter pointed out.
“One important characteristic of the single-family housing market is that there have been more single-family homes that completed construction than have been started over the past four months,” said Robert Dietz, NAHB chief economist. “The most recent data for November shows there were 25,500 more single-family homes completed than started, thus pushing down the number of new homes under construction.”
The number of single-family units under construction has slid for six straight months, dropping to 777,000 in November. And more bad news may be on the horizon, with November’s building report revealing a stark pullback in building permits. Total permits plunged 11.2%, with both single-family (down 7.1%) and multifamily (down 16.4%) permitting slowing significantly in November. The large decreases suggest that builders are looking to substantially scale back construction amid waning residential demand and rising recessionary concerns.
The big multifamily permitting drop is especially notable, even when considering seasonality and the sector’s usual construction volatility on a monthly basis. Even as apartment and condominium building have weathered the storm of 2022 more stoutly than single-family, multifamily permits are still 9.2% below their level at this time last year. Further moderation, especially of such magnitude given the current economic circumstances, suggests slowing demand for apartments and condos that will likely hold down multifamily construction in 2023.