Housing starts rise on falling mortgage rates

Housing starts rose in November, significantly beating expectations.

New construction rose to a seasonally adjusted annual rate of 1,560,000, according to the U.S. Department of Housing and Urban Development and U.S. Census Bureau data. It’s 14.8% above the revised October estimate of 1,359,000 and 9.3% above the November 2022 rate of 1,427,000.

Single-family building activity drove November residential construction activity. Overall, single‐family housing starts in November came in at a rate of 1,143,000, 18% above the revised October figure of 969,000.

“The number of new single-family homes under construction was up more than 40% compared to a year ago,” Bright MLS Chief Economist Lisa Sturtevant said in a statement.

Meanwhile, starts of units in multifamily buildings (buildings with five or more units) fell 33.7% compared to a year ago. Looking at data on residential permits, Sturtevant forecasts that “new single-family housing construction will continue to be robust heading into 2024, though apartment construction will be slow.”

Builder confidence gained three points to 37 in December, the first monthly increase since July.

But permits for future construction fell 2.5% from October. Indeed, privately‐owned housing units authorized by building permits in November were at a seasonally adjusted annual rate of 1,460,000, down from 1,498,000 in October. Single-family permits increased (+0.7%) to 976,000 in November, up from 969,000 in October.  Multifamily permits came in at 435,000, a decline from October’s 469,000.

More homes are also exiting the new construction pipeline, with completions up in November giving buyers more options, according to Zillow Senior Economist Nicole Bachaud.

Completed homes fell to a seasonally adjusted annual rate of 1,447,000, a 5% jump from the prior month but 6.2% below the November 2022 level. 

Despite the elevated mortgage rates, homebuilders’ sales have increased this year. According to Lawrence Yun, NAR chief economist, it is partly due to homebuilders’ willingness to use incentives such as rates buy-downs. 

“Another 30% rise in home construction can easily be absorbed in the marketplace, especially in light of recent weeks’ plunge in mortgage rates,” he added.