Multi-Family Buoyed New Construction In June, Single-Family Took A Hit

New residential construction got a boost from multi-family units in June as builders continue to hesitate when it comes to investing in single-family homes.

Housing starts were up 3% from May to a 1.35 million annual pace, according to new data from the U.S. Census Bureau.

The increase came from a nearly 20% jump in multi-family construction. Single-family starts were down 2.2% from May, marking the fourth consecutive month of declines and an eight-month low.

Permits rose by 3.4% to a 1.45 million rate, once again buoyed by multi-family. Permits act as an indicator of future construction.

Permits for single-family properties alone fell 2.3% to their slowest pace in a year.

The data comes just days after the National Association of Home Builders released its Housing Market Index, which showed builder confidence falling to its lowest point this year.

A combination of near-7% rates and elevated construction financing costs are making homebuilders nervous, leading to reduced activity in the sector.

But the Central Bank has recently indicated that rate cuts may be on the way, offering some hope for builders’ futures.

“While buyers appear to be waiting for lower interest rates, the six-month sales expectation for builders moved higher, indicating that builders expect mortgage rates to edge lower later this year as inflation data are showing signs of easing,” said NAHB Chairman Carl Harris.

In a recent podcast, Ed Pinto, senior fellow and co-director of AEI Housing Center, talked about ways to help builders increase housing supply.

Pinto said the government could reduce tariffs.

“Particularly Canada is a big place where we can import lumber. Canada is a big supplier of lumber, and we have tariffs on Canadian lumber and if those tariffs didn’t exist, we’d be getting more lumber from Canada,” Pinto said.

Pinto said that AEI takes the position that the main limitation on an abundant supply of housing comes down to zoning and land use regulations.

“It is not due to lumber, it’s not due to labor costs, it’s not due to the other things that are mentioned. It fundamentally is due to the zoning and land use requirements which do one thing. They drive up the cost of land, and land becomes a very key component to the price of new construction, and the price of new construction gets very expensive, particularly if the zoning requires a lot of land for a house.”

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