January Housing Starts Fall on Multifamily Drop

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Originally Published by: HBS Dealer — February 16, 2024
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Housing starts opened 2024 on a sour note.

Total starts for January fell 14.8% to a seasonally adjusted annual rate of 1.331 million from a revised December 2023 estimate of 1.562 million, the U.S. Census Bureau and the U.S. Department of Housing and Urban Development reported this morning in the latest Monthly New Residential Construction report.

The new figure is also 0.7% below the January 2023 rate of 1.340 million.

Single‐family housing starts in January were at a rate of 1.004 million, declining 4.7% from a revised December figure of 1.054 million. But on a year-over-year basis, single-family starts jumped ahead 22%.

The January rate for units in buildings with five units or more was 314,000, plummeting 35.8% from the previous month’s pace and dropping 37.9% on a year-over-year basis.

“Moderating mortgage interest rates in 2024 will ultimately lead to gains for single-family home building this year,” said Alicia Huey, chairman of the National Association of Home Builders (NAHB) and a custom home builder and developer from Birmingham, Ala. “However, tighter lending conditions and higher costs for construction and development loans are holding back some construction at the start of the year.”

Overall residential permits in January were at a seasonally adjusted annual rate of 1.470 million, which is a 1.5% decline compared to the December 2023 rate of 1.493 million. Permits are 8.6% above the January 2023 rate of 1.354 million, however.

The trajectory of combined and single-family starts over the past 10 years.

Single‐family permits increased 1.6% to a rate of 1.015 million in comparison to the revised December 2023 rate of 999,000.  

Authorizations of units in buildings with five units or more were at a rate of 405,000 in January, down 9% from December 2023 and decreasing 26.6% on a year-over-year basis.

“Multifamily construction is forecasted to post a large decline in 2024 as the number of units currently under construction is near the highest level since 1973,” said NAHB Chief Economist Robert Dietz. “Meanwhile, single-family production, which is currently running at a 1-million-unit annual rate, is roughly in line with builder sentiment that remains right below a breakeven level, according to our latest surveys. We are forecasting single-family starts to post a modest gain in 2024 as mortgage rates moderate on expected interest rate cuts by the Federal Reserve later this year.”

On a regional basis compared to the previous month, January's combined single-family and multifamily starts fell by 20.6% in the Northeast, declined 30% in the Midwest, were 9.7% lower in the South, and diminished by 15.7% in the West.

Compared to the previous month, total permits in January climbed 19.4% in the Northeast, rose by 6.6% in the Midwest, fell by 7% in the South, and moved ahead 1.5% in the West.