Source: Realtor.com —
Highlights:
- US housing markets continue to struggle with a sizable shortage of new homes, a result of more than a decade of under-building relative to population growth.
- In 2022, the U.S. saw 2.06 million household formations, resulting in 15.6 million household formations between 2012 and 2022. In this time period, 13.3 million housing units were started, and 11.9 million were completed.
- The total housing starts count includes 9.03 million single-family and 4.2 million multi-family homes. Housing completions include 8.5 million single-family homes and 3.4 million multi-family homes.
- The gap between single-family home constructions and household formations grew to 6.5 million homes between 2012 and 2022. However, including multi-family home construction reduces this gap to 2.3 million homes.
- Multi-family home construction picked up in 2022, reaching 35.1% of all housing starts by the end of the year, a level not seen since 2015.
- The rate of overall housing starts slowed in 2022 while completions climbed.
- In 2022, roughly 1.0 million single-family homes were started, which is 10.6% fewer than in 2021, though still more than in any other single year back to 2012.
- Multi-family home starts picked up, reaching 545,500, up 15.0% compared to 2021, and up 47.8% compared to the 2012-2021 average.
- In 2022, 1.4 million housing units were completed (+3.8% YY), including 1.02 million single-family units (+5.4% YY) and 370,700 multi-family units (-0.2% YY). The overall number of home completions and the rate of single-family home completion were both the highest in the last 10 years.
- Builders’ sentiment dwindled in 2022, reaching the lowest level since April 2020. Sentiment improved slightly in January 2023 as mortgage rates dropped, though the index remained near recent lows.
- New home affordability continues to drop rapidly with just 10% of new homes sold for less than $300,000 in Q4 of 2022, down from 41% in the fourth quarter of 2019.
Affordability Struggles Cool the Housing Market
In the second half of 2021, single-family homes were being both started and completed at the fastest pace in the last decade. Early 2022 continued the previous year’s trend until the middle part of the year, when the market felt the impact of the ascent of mortgage rates. In response, red-hot buyer demand cooled and builders started to pull back on single-family home starts, though completions continued at a decade’s high clip. Builder confidence fell slowly in the beginning of the year, before dropping off more dramatically in May and continuing to fall all the way to an index of 31 in December 2022, the lowest level since June 2012, down from the pandemic high of 90 in November 2020, and down from 84 in December 2021. As construction activity slowed, household formations continued to climb, reaching the highest number of total households in US history in December 2022 with over 2 million new households added in the course of a year.
Single-family housing starts fell in tandem with builder confidence, and in response, builders pivoted towards multi-family housing as the rental market remained profitable with nationwide rent hitting a new all-time high. Housing construction of buildings with 2-or-more units was 29.6% of all housing starts in 2021 and grew to 35.1% by the end of 2022. The fruits of this pivot will pan out over the next year as the typical multi-family home takes 15 months to complete, whereas a single-family home takes closer to 7 months. In January 2023, for example, even as multi-family housing starts slowed, a record high of 932,000 multi-family housing units were under construction. Multi-family housing can help with ongoing housing affordability issues by providing more supply for renters.
