Affordability Woes Continue to Plague the U.S. Housing Market
According to a new report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau, the single-family housing market in the U.S. continued to show signs of softening in March 2022 as permits and starts declined due to rising mortgage interest rates and ongoing supply chain bottlenecks that continue to delay construction projects and raise home building costs.
Due to strong multifamily production, overall housing starts increased 0.3% to a seasonally adjusted annual rate of 1.79 million units.
The March reading of 1.79 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts decreased 1.7% to a 1.20 million seasonally adjusted annual rate. The multifamily sector, which includes apartment buildings and condos, increased 4.6% to an annualized 593,000 pace.
"Higher mortgage interest rates and rising construction costs are pricing buyers out of the market, and these higher costs are particularly hurting entry-level and first-time buyers," said Jerry Konter, chairman of the National Association of Home Builders. "Policymakers must address building supply chain disruptions to help builders bring down construction costs and increase production to meet market demand."
"The shift in affordability can be seen in the March data with strength for multifamily construction and some weakness for single-family permits," said NAHB Chief Economist Robert Dietz. "Our builder surveys show that confidence levels in the single-family market have declined for four straight months as affordability conditions continue to worsen, and this is a sign that single-family production will face challenges moving forward."
On a regional and year-to-date basis, combined single-family and multifamily starts are 17.3% higher in the Northeast, 6.6% higher in the Midwest, 11.2% higher in the South and 7.5% higher in the West.
Overall permits increased 0.4% to a 1.87 million unit annualized rate in March. Single-family permits decreased 4.8% to a 1.15 million unit rate. Multifamily permits increased 10.0% to an annualized 726,000 pace.
Looking at regional permit data on a year-to-date basis, permits are 5.5% higher in the Northeast, 4.0% higher in the Midwest, 7.5% higher in the South and 4.9% higher in the West.
Single-family permits authorized but not started increased 7.6% in March to 127,000 and are up 30.9% year-over-year as higher construction costs and material delays slow previously permitted projects.