The number of single-family homes is trending upward

As the Federal Reserve eased monetary policy and builder sentiment improved, single-family home construction projects rose slightly in September, while multifamily construction continued to weaken due to tight financing and a continued increase in home completions.

Total housing starts fell 0.5% in September to a seasonally adjusted annual rate of 1.35 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

According to an analysis by the National Association of Home Builders, September’s figure of 1.35 million housing starts represents the number of housing units developers would begin building if development continued at that pace over the next 12 months. Within that total, single-family home starts rose 2.7% to a seasonally adjusted annual rate of 1.03 million. Single-family home construction has increased by 10.1% so far this year. The September increase in single-family home construction reflected an increase in the NAHB/Wells Fargo HMI.

While single-family home construction increased in September, higher mortgage rates in October are expected to dampen growth in next month’s data. Still, the NAHB forecasts a gradual, if uneven, decline in mortgage rates in the coming quarters, with corresponding increases for single-family home construction.

The multifamily sector, which includes apartment buildings and condominiums, fell 9.4% to an annual rate of 327,000. This is the weakest pace since May. Multifamily construction will remain weak as apartment completions increase.

Regionally and year-to-date, combined single-family and multifamily starts are 9.0% higher in the Northeast, 2.0% lower in the Midwest, 4.6% lower in the South and 5.4% lower in the West.

Total permits fell 2.9% in September to an annual rate of 1.43 million units. Permits for single-family homes rose 0.3% to 970,000 units. Multifamily permits fell 8.9% to an annual rate of 458,000. This is the weakest value since May.

Looking at regional data on an annual basis, permits are 0.8% lower in the Northeast, 2.6% lower in the Midwest, 2.2% lower in the South, and 5.1% lower in the West.

The number of single-family homes under construction totaled 642,000 in September. After a recent stabilization, this value is now only 4.5% lower than a year ago. The number of multi-family homes under construction fell by 3.4% in September to a total of 842,000. That is 16.5% less than a year ago and the lowest value since February 2022.

As a sign of the trend reversal in multi-family home construction, the seasonally adjusted annual rate of multi-family home construction was 680,000 in September. That was about twice as fast as apartment building starts, meaning that for every two apartments that finished construction, only one new unit began construction. The pace of multifamily home completions increased by 41% compared to the previous year.