Real Estate

Multifamily projects propel housing starts

Single-family construction falls behind, again

Housing starts increased 1.5% in October, propelled by the multifamily sector, according to the latest report from the U.S. Census Bureau and the Department of Housing and Urban Development.

TIAA Bank Chief Consumer and Commercial Banking Executive John Pataky said: “This report is a stalemate between the demand and supply sides of the market, which are moving in different directions right now. On the demand side, we are seeing some surprising upsides.”

“Mortgages are relatively attractive right now, since the long end of the yield curve has not moved as much as expected in response to short-term rate increases,” Pataky continued. “Furthermore, price growth is continuing to normalize after a stretch of growth well above long-term sustainable levels.”

“However, we are still seeing significant supply challenges in the market, with the confidence of rate-sensitive homebuilders starting to wane. If long-term rates continue to rise as expected, the housing market could be in for a bumpy ride in 2019,” he concluded.

Privately owned housing starts increased in October to a seasonally adjusted annual rate of 1.228 million, up 1.5% from September’s 1.201 million, but is still 2.9% below the annual rate of 1.265 million in October 2017. 

Single-family housing starts stood at a rate of 865,000, down 1.8% from the September’s revised rate of 881,000. This is the second consecutive month of decrease, signaling a slowdown in the sector. 

Despite this, multifamily starts lead the way, coming in at 343,000, an increase from last month's 324,000.

The September rate for units in buildings with five or more units increased to a seasonally adjusted rate of 376,000, increasing from 324,000 in September.

Building permits decreased from September both monthly and annually. The number of homes being built slid 0.6% from 1.270 million in September to a seasonally adjusted annual rate of 1.263 million in October, down 6% from 1.343 million one year ago.

Privately owned housing completions decreased to a seasonally adjusted annual rate of 1.111 million in October, down 3.3% from September’s 1.149 million. Notably, this is 6.5% below 1.188 million in October 2017.

Single-family housing completions decreased 1.2% from 842,000 in September to a rate of just 832,000 completions in October. Chief Economist Danielle Hale said consumers are less optimistic about home buying right now, and builders are starting to notice.

“While still at a positive level, confidence slipped notably in November. Looking ahead, starts could slip further if builders believe the consumer pause will continue and they adjust production accordingly,” Hale said. “Rising home prices and rising mortgage rates have created high hurdles for homebuyers while cost increases make it difficult for builders to deliver homes at the price points that are most in-demand. The result has been a stalemate between buyers and sellers, with fewer transactions than we saw a year ago.”

3d rendering of a row of luxury townhouses along a street

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