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 a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau, overall housing starts declined 14.4 percent in May 2022 to a seasonally adjusted annual pace of 1.55 million units, compared to an upwardly revised figure for the prior month.
The May estimate of 1.55 million starts represents the number of housing units that would be constructed if construction continued at this rate for the following 12 months. Within this total, single-family starts declined 9.2 percent to a seasonally adjusted annual pace of 1.05 million. The multifamily sector, which includes apartment complexes and condominiums, declined by 23.7% to an average pace of 498,000.
New Construction Permits 2022
In the first five months of 2022, a total of 473,997 single-family building permits were issued across the nation. This is a YoY decrease of 2.0 percent compared to the May 2021 level of 483,878. In three of the four regions, single-family permits decreased year-to-date through May. The South saw a minor growth of 1%, while the Northeast experienced the biggest decrease of 11.7%.
Permits for single-family homes fell by 11,2 percent in the Midwest and 2,2 percent in the West during this period. In each of the four areas, multifamily permits increased. Permits increased by 39.3 percent in the Midwest, 20.2% in the South, 10.9 percent in the West, and 1.8 percent in the Northeast. Between May 2021 YTD and May 2022 YTD, the number of single-family permits granted increased in 12 states.
New Mexico had the largest increase rate over this period, at 42,2%, from 2,502 permits to 3,558 permits. During this period, single-family permits decreased in 38 states and the District of Columbia, with the District of Columbia reporting the greatest loss of 25.5 percent, from 208 permits to 155 permits. The 10 states that granted the most single-family permits accounted for 64,4 percent of the total number of single-family permits issued.
By May of 2022, the total number of multifamily permits issued in the United States reached 265,751. This is 17.3 percent higher than the level in May 2021 of 226,634. Between May 2021 YTD and May 2022 YTD, multifamily permits increased in 33 states while decreasing in 17 states and the District of Columbia. Indiana led the way with a 274.6 percent increase in multifamily building permits, from 1,134 to 4,248, while Delaware saw the highest decrease, from 649 to 121. The 10 states that granted the most multifamily permits collectively accounted for 62,6% of all multifamily permits issued.
New Housing Construction Trends 2022
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.
According to the National Association of Home Builders (NAHB)/Wells Fargo, Housing Market Index (HMI) released today, builder confidence in the market for newly-built single-family homes posted its sixth consecutive monthly decline in June, falling two points to 67. This is a concerning sign for the housing market. The HMI has not been this low since June of 2020.
All three HMI indices posted declines in June. The component charting traffic of prospective buyers fell five points to 48, marking the first time this gauge has fallen below the breakeven level of 50 since June 2020. The HMI index gauging current sales conditions fell one point to 77 and the gauge measuring sales expectations in the next six months fell two points to 61.
Looking at the three-month moving averages for regional HMI scores, the Northeast fell one point to 71, the Midwest dropped six points to 56, the South fell two points to 78 and the West posted a nine-point decline to 74.
“Six consecutive monthly declines for the HMI is a clear sign of a slowing housing market in a high inflation, slow growth economic environment,” said NAHB Chairman Jerry Konter, a builder and developer from Savannah, Ga. “The entry-level market has been particularly affected by declines in housing affordability and builders are adopting a more cautious stance as demand softens with higher mortgage rates. Government officials need to enact policies that will support the supply-side of the housing market as costs continue to climb.”
In 2021, the Mortgage Bankers Association (MBA) predicted single-family housing starts to be around 1.134 million. And that could just be the beginning, as projections in the future are even rosier: 1.165 million single-family homes in 2022 and 1.210 million in 2023. New home builders will ramp up production to help relieve the inventory shortage of homes for sale throughout the United States. The added inventory would no doubt aid buyers in their search to secure their dream home, while also helping to ease price increases throughout the country.