Supply Chain Bottlenecks, Rising Interest Rates Hinder New Construction
Overall housing starts rose 12.2% in August to a seasonally adjusted annual rate of 1.58 million units, but elevated mortgage rates, high construction costs, and persistent supply chain bottlenecks continue to strain single-family production, NAHB reports. With an even tighter monetary policy anticipated from the Federal Reserve, builder sentiment is on the decline even in regional markets that are beginning to cool.
Single-family permits decreased 3.5% to an 899,000 unit rate in August, while multifamily permits fell 17.9% to 618,000 units. Overall permits dropped 10% for the month to a 1.52 million unit annualized rate, signaling a slowdown in new construction toward the end of the year.
“Today’s housing starts report is more evidence that the housing recession is deepening for the single-family market, with the pace below 1 million for the last two months,” said Jing Fu, NAHB’s director of forecasting and analysis. “Expected additional tightening of monetary policy from the Federal Reserve, falling builder sentiment and a 15.3% year-over-year decline in single-family permits points to further weakening for the housing sector. The one bright spot is multifamily construction, which remains very strong given solid demand for rental housing.”