Housing starts increased 3.2% in November, once again championed by the multifamily sector, according to the latest report from the U.S. Census Bureau and the Department of Housing and Urban Development.
“Housing starts increased for the first time in three months, driven by a surge in multifamily construction,” Mortgage Bankers Association Associate Vice President of Economic and Industry Forecasting Joel Kan said. “However, single-family starts dropped over 4% to their lowest monthly level since March 2017, and even more on a year-over-year basis – nearly 13%.”
Privately owned housing starts increased in November to a seasonally adjusted annual rate of 1.256 million, up 3.2% from October’s 1.217 million, but is still 3.6% below the annual rate of 1.303 million in November 2017.
Single-family housing starts stood at a rate of 824,000, down 4.6% from October’s revised rate of 864,000. However, the November rate for units in buildings with five or more units increased to a seasonally adjusted rate of 417,000, increasing from 376,000 in October.
“Homebuilding activity in November was consistent with the less favorable builder sentiment readings we’ve seen in recent months, as builders are still challenged by several factors, including high input and labor costs,” Kan continued. “These results also likely reflect slower demand for new single-family homes, as emerging economic and financial market uncertainty, coupled with affordability challenges, are keeping some potential homebuyers away.”
Building permits increased from October both monthly and annually. The number of homes being built rose 5% from 1.265 million in October to a seasonally adjusted annual rate of 1.328 million in November, up 0.4% from 1.323 million one year ago.
Privately owned housing completions increased to a seasonally adjusted annual rate of 1.099 million in November, up 0.4% from October’s 1.095 million. Notably, this is 3.9% below 1.144 million in November 2017.
Single-family housing completions fell 5.4% from 816,000 in October to a rate of 772,000 completions in November. Lastly, multifamily housing completions for units in buildings with five units came in at 314,000 in November.
“Housing number blipped up a bit for November, but the trend is still down, especially for single-family homes that fell 4.6% to their lost level since May of last year,” Navy Federal Credit Union Economist Robert Frick said. “That drop was masked by a strong increase in starts for apartment building and condos, which jumped 22.4%”
“Years of rising prices capped by this year’s rise in mortgage rates is putting homeownership out of the reach of many Americans. That affordability is an issue is reflected by dropping builder optimism,” Frick continued. “Builders have begun cutting prices of homes in many regions to reach a pool of millions of Americans still hopeful to buy a home. Should prices drop significantly, and should mortgage rates at least hold steady after dropping from highs near 5%, we could see a modest rebound in building and sales in 2019. Inventory is finally growing for both new and used homes, also a hopeful sign.”
However, Frick said the trends of higher housing – mainly land, labor and building materials – makes building less expensive homes a tough proposition for builders now and for the foreseeable future.