U.S. New-Home Construction in Multifamily Project Slump

U.S. new-home construction fell unexpectedly in November, driven by a significant drop in multifamily projects. Housing starts decreased by 1.8%, reaching an annualized rate of 1.29 million, the weakest pace since July. This was lower than the projected rate of 1.35 million.

Single-Family Home Starts Rise

Single-family home construction showed a 6.4% increase, reaching an annualized rate of 1.01 million. This surge was largely driven by a recovery in the South, where construction increased by 18.3%, particularly in areas like Florida, recovering from hurricane delays.

Regional Variations in Construction Activity

While the South saw growth, other regions experienced declines. The Midwest saw a 28.2% drop in new-home construction, and the West experienced nearly a 12% fall. In the Northeast, single-family home starts dropped to their lowest point since July 2021.

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Building Permits Indicate Future Growth

Building permits rose by 6.1%, indicating potential future growth, with an annualized rate of 1.51 million. Permits for single-family homes remained mostly unchanged at an annualized rate of 972,000, signaling stability in that sector.

Construction Backlog Continues to Decline

The number of ongoing construction projects fell by 1.8%, marking the lowest level in over three years. Single-family homes under construction also dropped to their lowest level since March 2021, signaling a slowdown in the construction pipeline.

Demand Still Weighed Down by High Borrowing Costs

Housing demand remains affected by elevated borrowing costs. The average 30-year fixed mortgage rate has increased since reaching a two-year low in September and is expected to stay above 6% for at least the next two years, dampening homebuyer enthusiasm.

Builders Struggle with Profit Margins

To attract buyers, builders have been offering “mortgage buydowns” and occasional price reductions. However, these strategies have put pressure on profit margins, with some analysts noting a significant erosion of profits in the sector.

Volatility in Housing Data

The housing construction data remains volatile, with the government report indicating uncertainty in monthly changes. The National Association of Realtors will release the November report on previously owned home sales on Thursday, which could provide further insights into the housing market.