On the strength of better-than-expected multifamily numbers, housing starts in March increased 0.3% overall to a seasonally annualized rate of 1.793 million units, the highest mark since 2006.
The multifamily sector, which includes apartment buildings and condos, rose 4.6% to annualized pace of 593,000 units, according to a report released Tuesday by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. It wasn’t all good news: single-family housing starts dropped 1.7% to a seasonally adjust annual rate of 1.20 million units.
“Today’s housing starts gain was driven by gains in multi-family construction,” First American deputy chief economist Odeta Kushi said in a statement. “Permits and completions were also up for multifamily on a month-over-month basis. Single‐family housing starts in March were 1.7% below the revised February figure, but remain above pre-pandemic levels. Permits and completions were also down month-over-month for single-family homes.”
Nationwide, overall permits increased 0.4% to an annualized pace of 1.87 million units in March. However, single family permits dropped 4.8% to a rate of 1.15 million units, while multifamily permits increased to a pace of 726,000 units.
Single family permits authorized but not started increased 7.6% in March to 127,000. This is a 30.9% year-over-year increase.
Experts blamed the drop in single family housing starts and permits on ongoing supply chain issues, which are delaying construction and contributing to increasing building costs, and rising mortgage rates.
“The shift in affordability can be seen in the March data with strength for multifamily construction and some weakness for single-family permits,” the National Association of Homebuilders chief economist Robert Dietz said in a statement. “Our builder surveys show that confidence levels in the single-family market have declined for four straight months as affordability conditions continue to worsen, and this is a sign that single-family production will face challenges moving forward.”
In April, the NAHB/Wells Fargo Housing Market Index dropped two points to a reading of 77, marking the fourth consecutive month of declines.
“Sagging homebuilder confidence, which fell for the fourth month in a row, reflects these concerns,” Kushi said in a statement. “Yet, it’s important to point out that homebuilder confidence is less ‘bullish’ as opposed to actually ‘bearish.’ Builder sentiment remains higher than pre-pandemic as several long-term trends continue to boost demand for new construction, particularly a growing labor market, demographic tailwinds from millennials entering their prime home-buying years, and a lack of existing-home inventory.”
Regionally, on a year-to-date basis, overall housing starts were up 17.3%. In the Northeast, 6.6% in the Midwest, 11.2% in the South and 7.5% higher in the West.