Housing Starts hit a five-month low in January, down a sharp 14.8% from December. While the bulk of the decline was in multi-family projects, single-family starts also ticked lower.
However, the NAHB predicts that “single-family starts will rise about 5% this year,” per their Chief Economist, Robert Dietz, and there are already signs to support this forecast. Single-family Building Permits (which reflect future construction) were at their highest level in a year, up a whopping 35.7% when compared to January 2023.
What’s the bottom line? “Moderating mortgage interest rates in 2024 will ultimately lead to gains for single-family home building this year,” said NAHB Chair Alicia Huey.
Given the persistent low supply of available homes for sale, more inventory is welcome news for buyers around the country, though there is still a long way to go for supply to catch up with demand. The pace of completed homes that will be coming to market is now around 1.4 million homes annualized, and then we must subtract roughly 100,000 homes that need to be replaced every year due to aging. This puts us well below demand as measured by household formations that are trending at almost 1.7 million as of the end of December.
More demand than supply will continue to be supportive of home values, especially if mortgage rates decline during the busier spring homebuying season.