New Housing Data Shows Increased Interest Rates and Starts05-20-24 | Economic News

New Housing Data Shows Increased Interest Rates and Starts

NAHB Analyzes Impact of Rising Interest Rates on Housing Starts
by Staff

Housing starts increased in April, but single-family construction faced headwinds due to higher interest rates.

The National Association of Home Builders (NAHB) recently analyzed the April housing data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
They found that single-family starts remained flat as builders faced tighter lending conditions, despite a 5.7% increase in overall housing starts to a seasonally adjusted annual rate of 1.36 million units.

Within this total, single-family starts fell by 0.4% to a seasonally adjusted annual rate of 1.03 million, although this rate is 17.7% higher than the previous year. Year-to-date, single-family starts are up 25.7%, reaching 335,600 units. Meanwhile, the multifamily sector saw a 30.6% increase to an annualized 329,000 units.

"While the start of the year has seen an expansion for single-family home building due to a lack of existing home inventory, home building activity leveled off in April as higher interest rates, tighter lending conditions, and lower home building sentiment acted as headwinds on new home construction," said Carl Harris, chairman of NAHB. "Lower interest rates, particularly for builder and developer loans, will help builders increase the pace of home construction in the months ahead."

NAHB Chief Economist Robert Dietz noted, "Moving forward, the multifamily market will see additional declines for construction volume, while the pace of completions remains elevated. This additional rental supply will help lower shelter inflation, which is the last leg of the inflation policy challenge."

Regionally, combined single-family and multifamily starts are 24.5% lower in the Northeast, 11.0% higher in the Midwest, 1.8% higher in the South, and 8.4% higher in the West. Overall permits decreased by 3.0% to a 1.44-million-unit annualized rate in April. Single-family permits dropped by 0.8% to a 976,000-unit rate, the lowest since August 2023, while multifamily permits fell by 7.4% to an annualized rate of 464,000 units.