New Housing Starts 2022
The housing market continues to face considerable headwinds from rising interest rates and interruptions in the building material supply chain, which boost construction costs. Housing Starts refer to the number of new residential construction projects that have begun during any particular month. Estimates of housing starts include units in structures being rebuilt on an existing foundation.
According to the U.S. Department of Housing and Urban Development and the U.S. Census Bureau, housing starts in the United States tumbled 9.6 percent month-over-month to an annualized rate of 1.446 million units in July of 2022, the lowest since February of 2021 and well below market expectations of 1.54 million.
The housing sector has been cooling down amid soaring prices of materials and rising mortgage rates. Single-family housing starts sank 10.1 percent to 916 thousand, the lowest level since June 2020. Starts for units in buildings with five units or more slipped 10 percent to 514 thousand. Starts were lower in the Midwest (-33.8 percent to 139 thousand), the South (-18.7 percent to 710 thousand), and in the West (-2.7 percent to 367 thousand) but rose in the Northeast (65.5 percent to 230 thousand).
New Housing Construction Trends 2022
The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for July new residential construction permits. The latest reading of 1.674M was down 1.3% from the June reading and is above the Investing.com forecast of 1.650M. Building permits in the US decreased 1.3% to an annualized rate of 1.674 million in July of 2022, the lowest level since September last year, compared to forecasts of 1.65 million.
Single-family authorizations dropped 4.3 percent to 928 thousand units, while approvals of units in buildings with five units or more rose 2.5 percent to 693 thousand. Building permits declined in the West (-12 percent) and the South (-0.1 percent) but increased in the Northeast (9.3 percent) and Midwest (8.1 percent).
Privately‐owned housing completions in July were at a seasonally adjusted annual rate of 1,424,000. This is 1.1 percent (±14.8 percent) above the revised June estimate of 1,409,000 and 3.5 percent (±15.5 percent) above the July 2021 rate of 1,376,000. Single‐family housing completions in July were at a rate of 1,009,000; this is 0.8 percent (±12.2 percent) below the revised June rate of 1,017,000. The July rate for units in buildings with five units or more was 412,000.
According to NAHB analysis of quarterly Census data, multifamily for-rent housing starts surged during the second quarter of 2022 to 142,000 units, the largest quarter for rental multifamily construction since the second quarter of 1986. The market share of rental units of multifamily construction starts bounced back to 96%. In contrast, the historical low share of 47% was set during the third quarter of 2005, during the condo building boom. An average share of 80% was registered during the 1980-2002 period.
The NAHB also gets input from builders on how confident they are in the housing market based on buyer behavior, and sales, and incorporates any forecasts as well. Increasing inflation and borrowing rates are reducing the number of prospective homebuyers and dampening builder morale.
In August 2022, builder sentiment fell for the eighth consecutive month as rising interest rates, ongoing supply chain issues, and high home prices continued to exacerbate housing affordability issues. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) revealed that builder confidence in the market for newly constructed single-family homes fell six points in August to 49, marking the first time since May 2020 that the index fell below the key break-even measure of 50.
In the past month, roughly one-fifth (19%) of home builders who responded to the HMI survey reported lowering prices to increase sales or limit cancellations. The median price reduction for those using such incentives was 5%. Moreover, 69% of builders cited rising interest rates as the leading cause of declining housing demand, according to the survey.
All three components of the HMI declined to their lowest levels since May 2020. Current sales conditions dropped seven points to 57, sales expectations for the next six months fell two points to 47, and buyer traffic dropped five points to 32. Looking at the three-month moving averages for regional HMI scores, the Northeast fell nine points to 56, the Midwest dropped three points to 49, the South fell seven points to 63 and the West posted an 11-point decline to 51.
“Tighter monetary policy from the Federal Reserve and persistently elevated construction costs have brought on a housing recession,” said NAHB Chief Economist Robert Dietz. “The total volume of single-family starts will post a decline in 2022, the first such decrease since 2011. However, as signs grow that the rate of inflation is near peaking, long-term interest rates have stabilized, which will provide some stability for the demand-side of the market in the coming months.”
Sources
- https://www.nahb.org/
- https://www.census.gov/
- https://www.nahb.org/blog/2022/08/multifamily-for-rent-starts-experience-record-quarter
