Housing inventory is on its way up, with single-family residential construction in November jumping 18% above October’s revised figure, the highest since April 2022.
The U.S. Census Bureau and Department of Housing and Urban Development’s monthly residential construction report indicated total month-over-month increases in privately-owned housing starts and completions.
“Single‐family housing starts in November were at a rate of 1.14 million, which is 18% above the revised October figure of 969,000,” First American Deputy Chief Economist Odeta Kushi said.
Kushi attributed the rise in single-family homebuilding in part due to lower mortgage rates, which fell gradually through November.
“Further, homebuilder sentiment ended the year on a more positive note increasing for the first time in five months,” Kushi pointed out. “Falling mortgage rates led to a pickup in prospective buyer traffic and sales expectations.”
Building permits for single‐family homes in November were at a rate of 976,000; 0.7% above October’s revised figure of 969,000.
Single‐family housing completions in November were at a rate of 960,000; 3.2% below the revised October rate of 992,000.
Financial analysts look at housing starts as an important indicator of where the economy is heading.
“Multi-family completions picked up nearly 27% on a month-over-month basis in November,” Kushi said. “This new supply will put downward pressure on rents, and there is more to come given all the multi-family units under construction.”
She went on to call the U.S. housing market “meaningfully underbuilt” despite the number of homes and apartments under construction.
“Estimates of the nationwide housing shortage vary, but tend to range from between 3.5 million to 5.5 million housing units. This implies that, even if all the apartments and homes currently under construction came to market tomorrow, we’d still be underbuilt by millions of units. In other words, the new supply of housing coming to market is more likely to ease, rather than erase, the national housing shortage, although this will vary by location.”
More housing supply is needed to meet demand, Kushi said, adding, "especially in an environment where most existing homeowners are rate locked-in and unwilling to part with their low mortgage rate. Builders are benefitting from a lack of re-sale inventory. The recent decline in mortgage rates should contribute to the single-family momentum.”
