Worse-Looking New Construction Numbers Without Multifamily

Mortgage News March 3, 2023

The home building industry was much more upbeat in January, so let’s examine what made the difference.

The pace of housing starts was 1.309m (annual), compared to forecasts for 1.360m and 1.371m previously.

The Building Permits reading held steady at 1.339m, versus 1.337m forecasts and 1.335m the previous month.

The data above illustrates that, despite the more-than-expected decline in housing starts, they remain higher than most pre-covid months since the crisis. They didn’t retrace nearly as much of their previous range as some other housing metrics.

In some cases, it is reasonable to expect new housing to perform better than housing in general with the reluctance of so many homeowners about moving out of their existing residences (either because they are unwilling to compromise their ultra-low rates, or because moving isn’t necessary for them). If we need further evidence to justify resilience, we need only look at the multifamily sector.

Multifamily has experienced much less decline than single-family, and has been extraordinarily even-keeled.

It doesn’t appear that the trend will change anytime soon. In terms of building permits, the difference is even more pronounced.

The number of multifamily units that have been permitted, but have not yet been started, is currently higher than the number of single-family units. A trend like this has happened before (the most recent instance took place in July), but it had never happened before 2012. Despite the post-pandemic decline in single-family construction, multi-family continues to gain ground.

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