US Housing Starts: Single Family Permits Fall, But Completions Rise, Adding Supply

November saw a further decrease in new U.S. home construction and permits fell as affordability and demand for homes were weakened by high borrowing prices and persistently high inflation.

What Happened: According to data issued by the Census Bureau and Department of Housing and Urban Development on Tuesday, residential starts dropped 0.5% last month to a 1.427 million yearly rate.

The annualized rate of single-family homebuilding fell 7% to 828,000, the lowest level since May 2020.

Applications to build, a leading indicator of future building activity, fell 11.2% to a rate of 1.34 million units. The rate of one-family home development permits decreased by 7.1%, slowing to its lowest level since 2020.

The good news was that both monthly and yearly completion rates for single-family homes climbed by about 10%.

Completions represent a new net supply added to housing stock, which is beneficial for the market at a time when undersupply is still a problem, though demand has sharply declined and inventory may rise as homes remain on the market longer.

Why It Matters: The rise in new home completions will be beneficial to the market in the long run.

Multi-family permits — duplexes, condos and apartments — permits fell to the lowest level since May 2021.

The decline in November's permits is a reflection of the general decline in housing demand. Permits are a leading indicator of upcoming starts.

Nevertheless, the backlog of multi-family homes in the works is growing and hit a new high of 915,000 units in November. Rents may eventually experience some downward pressure from the increased multi-family supply, falling from record highs.

Meanwhile, homebuilder sentiment has decreased, reaching its lowest point in December since more than 10 years prior to the start of the pandemic.

Read Also: Forty-one Percent Of Americans Expect A Housing Crash In 2023

Additionally, due to low demand, roughly two-thirds of builders such as Lennar Corp LEN, LGI Homes Inc LGIH and Toll Brothers Inc TOL now provide incentives to entice purchasers, such as mortgage rate buy-downs.

To read about the latest developments in the industry, check out Benzinga's real estate home page.

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