Housing starts increased 3% in June compared with May – driven by a surge in multifamily production – but were down 4.4% compared with June 2023, according to the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.
Total starts were at a seasonally adjusted annual rate of 1.353 million.
Starts of detached single-family homes were at a rate of 980,000, down 2.2% compared with May.
Starts of multifamily homes (five units or more per building) were at a rate of 360,000, an increase of 22% compared with May.
Building permits were at a seasonally adjusted annual rate of 1.446 million, an increase of 3.4% compared with May but down 3.1% compared with June 2023.
Permits for single-family homes were at a rate of 934,000, down 2.3% compared with May, while permits for multifamily dwellings were at a rate of 460,000, an increase of 19.2% compared with May.
Overall, annual production has been strong: Housing completions as of the end of June stood at an annual rate of 1.710 million, an increase of 10.1% compared with May and up 15.5% compared with June 2023.
“Lower single-family starts are in line with our latest builder surveys, which show that while builders are concerned about the current high interest rate environment, they believe that mortgage rates will moderate in the coming months and lead to higher construction in the latter part of 2024,” says Carl Harris, chairman of the National Association of Home Builders (NAHB).
“With better inflation data, the Federal Reserve is expected to begin rate reductions later this year, and an improving interest rate environment will help buyers as well as builders and developers who are contending with tight lending conditions and high interest rates,” adds Robert Dietz, chief economist for NAHB. “And with home inventory at a relatively low 4.4 months’ supply, builders are prepared to increase production in the months ahead. NAHB survey data of forward-looking builder sales expectations saw a gain in July.”
Odeta Kushi, deputy chief economist for First American, notes that single-family starts in June “fell to the lowest level since October 2023.”
“The decline in single-family groundbreaking aligns with homebuilder sentiment, which fell to the lowest level since December in June in the face of elevated mortgage rates,” Kushi says in a statement. “One bright spot in the June sentiment report is that the sales expectations sub-index increased, as builders believe lower mortgage rates are on the horizon. This could signal that the bottom for single-family starts is near.”
Kushi further notes that while single-family permits and starts are down month-over-month, “completions, which is new supply added to the market, is higher.”
“With more new homes coming on the market, new housing inventory is higher than it was a year ago, a modest improvement for home buyers,” she says.