However, homebuilder Jerry Konter noted that single-family production is running well below a one million-unit rate, indicating ongoing weakness in the housing market as high construction costs and elevated interest rates continue to present affordability challenges.
“Even though single-family starts are up on a monthly basis, permits indicate that the housing market will slow down further in 2023,” said Konter, chairman of the National Association of Home Builders (NAHB). “We expect a sustainable decline for mortgage rates in the second half of this year, which should lead to a housing recovery in 2024.”
The report also shows that an estimated 1.33 million housing units were authorized by building permits in December, 1.6% below the November figure of 1.35 million and 29.9% below the December rate of 1.90 million. Single-family authorizations in December were at a 730,000 pace, 6.5% below the revised November figure of 781,000. Multifamily permits were at a rate of 555,000 in December.
“The decline in single-family permits indicates that builders are slowing construction activity as interest rates have spiked in recent months,” said Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis. “Starts began on a strong footing in early 2022 but fell back in the latter part of the year as higher costs led to a pause in home building activity, and affordability conditions worsened for home buyers.”
While December housing starts and permits were lower year-over-year, NerdWallet home expert Kate Wood highlighted the 6.4% increase in housing completions – perhaps signaling easing in supply chain issues and labor shortages.