Residential Real Estate News
U.S. Housing Starts Dive 14.7 Percent from High Interest Rates in March
March recorded largest decline in 4 years as builders grapple with inflation
In March 2024, housing starts declined by 14.7% to a seasonally adjusted annual rate of 1.32 million units, influenced by higher-than-anticipated interest rates and persistent inflation, as reported by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. This rate reflects the projected number of housing units that builders would initiate if they continued at this pace for the next year. The decrease included a 12.4% drop in single-family starts to 1.02 million units and a 21.7% fall in multifamily starts, including apartments and condos, to a rate of 299,000 units.
Regionally, through the year to date, housing starts have varied, decreasing by 21.7% in the Northeast and 0.4% in the South, while increasing by 6.0% in the Midwest and 14.0% in the West. Building permits also declined overall in March by 4.3% to an annual rate of 1.46 million units, with single-family permits down 5.7% to 973,000 units and multifamily permits dropping slightly by 1.2% to 485,000 units.
Permit activity on a regional year-to-date basis shows a 34.5% increase in the Northeast, an 11.3% rise in the Midwest, and slight growth of 1.0% in the West, while the South saw a marginal decline of 0.9%.
Construction data for March 2024 shows 689,000 single-family homes under construction, a 2.7% decrease from the previous year, and 957,000 apartments under construction, marking a 1.6% decrease. Despite a reduction in apartment starts, the completion rate of these units has risen by 27.4% in the first quarter of 2024 compared to the same period in 2023. This increase in completions, especially in multifamily housing, is expected to moderate rent growth moving forward.
"Builders are grappling on several fronts as the inflation fight continues," said Carl Harris, chairman of the National Association of Home Builders. "Higher interest rates are increasing the cost of housing for prospective home buyers and raising the development and construction cost for builders of homes and apartments. At the same time, shelter inflation is rising faster than overall prices due to supply-side challenges."
"Single-family starts were down in March as interest rates increased and multifamily production fell as builders faced tighter financing conditions," said Danushka Nanayakkara-Skillington, NAHB's assistant vice president for forecasting and analysis. "And with single-family permits also down in March, single-family production will likely decline again in April."
