Single-Family Housing Contraction Continues in October

Elevated mortgage rates, high construction costs for concrete and other building materials, and weakening demand stemming from deteriorating affordability conditions continue to act as a drag on single-family housing production.

Overall housing starts decreased 4.2% to a seasonally adjusted annual rate of 1.43 million units in October, according to data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The October reading of 1.43 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts decreased 6.1% to an 855,000 seasonally adjusted annual rate. Year-to-date, single-family starts are down 7.1%. This decline mirrors the decline in the NAHB/Wells Fargo HMI, which has now contracted for 11 straight months and fallen to a level of 33. Higher interest rates in particular have reduced buyer traffic and priced out demand from the market.

This will be the first year since 2011 to post a calendar year decline for single-family starts. We are forecasting additional declines for single-family construction in 2023, which means economic slowing will expand from the residential construction market into the rest of the economy. Home prices are now falling, and there has not been a period in recent decades during which homes prices have declined and a recession has not occurred.