The new-home market posted some strong gains with more single-family homes and apartments underway at the start of the new year. The U.S. Commerce Department reported a surge in multifamily production and an uptick in single-family home construction in January, up 9.7 percent to a seasonally adjusted annual rate of 1.33 million units.
Multifamily production led the way, with a 23.7 percent increase in January, while single-family home production posted a 3.7 percent increase.
Lawrence Yun, NAR’s chief economist of the National Association of REALTORS®, says that the rise in single-family housing construction should help tame home price growth, while the increase in multifamily units likely will also help to curb rental costs.
Housing production was up in January across the country, led by increases in the Northeast. The Northeast posted a 45.5 percent increase in combined single- and multifamily housing production, followed by a 10.7 percent gain in the West and a 9.3 percent increase in the South. The Midwest was the only major region of the U.S. to see housing production drop in January, decreasing 10.2 percent.
“The large gain in housing starts in the west (10.7%) is especially welcomed, as that region has been facing acute housing shortages,” Yun says. “Ultimately, there is still large room for improvement given the fact that overall housing inventory is currently near historic lows.”
Yun also notes that the boost in housing supply will likely not only help the economy but also help the Federal Reserve temper the pace of short-term rate hikes. “That’s because the slow upward creep in the broad consumer price inflation is principally being driven by rising housing costs,” Yun explains. “Simply put, more housing supply means a lower inflation rate, and potentially a slower pace of interest rate increases by the Fed.”
Housing production should continue to see increases. Permit issuance—a gauge of future production—rose 7.4 percent to a seasonally adjusted annual rate of 1.4 million units, a post-recession high, the Commerce Department reports. Permits rose by the largest amounts in the South, up 92.5 percent, and by 17.1 percent in the West. Permits decreased by 21.7 percent in the Northeast and by 2.6 percent in the Midwest.
“The growth in production is in line with our reports of solid builder confidence in the housing market,” says Randy Noel, chairman of the National Association of Home Builders. “A pro-business regulatory climate and increasing housing demand are boosting builders’ optimism, even as they continue to face supply-side hurdles such as rising construction material prices and access to lots and labor.”