Single-Family Housing Starts Rose in March as Multifamily Fell

U.S. housing starts fell 0.8% in March from the previous month after a gain of 7.3% in February, as multifamily construction dropped, hindered by cutbacks in lending to commercial developers.

Single-family starts rose 2.7% from February, while multifamily declined by 5.9%.

“We expect choppiness for single-family construction in the months ahead, with the 2023 data posting significant year-over-year weakness before improving on a sustained basis,” said National Association of Home Builders Chief Economist Robert Dietz. “The multifamily market softened in March, and we anticipate ongoing declines for apartment construction in the months ahead due to tighter lending conditions in the commercial real estate sector.”

Housing starts totaled 1.42 million units, according to data from the U.S. Department of Housing and the U.S. Census Bureau. Single-family starts rose to 816,000, down 27.7% from March 2022. Multifamily starts totaled  559,000, down 5.7% from a year earlier.

Homebuilder sentiment is growing alongside increased single-family housing starts, according to the NAHB. 

“With builder sentiment climbing for four consecutive months and single-family starts continuing to move gradually higher from low levels since the beginning of the year, this indicates that a turning point for single-family construction will occur later this year after declines in 2022,” said Alicia Huey, NAHB's chair.

The pickup, especially for single-family construction, may help close the gap for families searching for homes. Market inventory for existing homes is historically low, with homeowners hesitating to sell amid higher mortgage rates than they are currently paying.

Between 2012 and 2022 the U.S. was in need of about 6.5 million single-family homes, a recent analysis from Realtor.com found. The rate of household formation is rapidly outpacing the number of new-build single-family homes on the market, making it difficult for would-be homebuyers looking to purchase.

Still, combined single-family and multifamily starts were down year-over-year in every region in the U.S. 

They were 8.3% lower in the Northeast, 34.5% lower in the Midwest, 11.5% lower in the South and 28.2% lower in the West. 

Permits decrease as single-family construction lags

Building permits dropped by 8.8% through March, to a 1.41 million annualized rate. 

Single-family permits increased 4.1% from February and fell 29.7% from March 2022. Multifamily permits fell alongside multifamily starts, decreasing by 22.1%. 

Year-over-year, permits were 24.5% lower in the Northeast, 25.3% lower in the Midwest, 15.7% lower in the South and 28.1% lower in the West. 

March brought the 10th monthly decline in the number of single-family homes under construction, dropping to 716,000. Builders finished 15,000 more homes than they started throughout March.