Housing supply remains a vexing problem in the real estate market. With too few homes on the market, housing costs keep climbing.
No one received any relief in the latest report Thursday on new residential construction by the U.S. Census Bureau and U.S. Department of Housing and Urban Development. Housing starts fell by 19.3% year over year in May to an annualized rate of 1.28 million. A year ago, private builders were at an annualized rate of 1.58 million, or a difference of 300,000 homes.
Much of the drop year over year can be attributed to a slowing pace of multifamily housing. The report shows that just 278,000 units were being built at an annualized rate in May. That’s down from 575,000 units a year ago or 51.7% fewer units.
Builders are concerned about the high interest rate environment, which is making it harder to acquire and develop land, said Carl Harris, chairman of the National Association of Home Builders (NAHB) and custom home builder from Wichita, Kansas, in a statement.
“Higher rates for builder and developer loans, along with ongoing supply-side challenges regarding construction labor and buildable lots, are acting as headwinds for new home and apartment construction,” Holman said.
Housing starts also were down month over month. In April, the revised report showed 1.35 million housing units compared to May’s 1.28 million figure, or a decline of 5.5%. Building permits also fell both year over year and month over month. Building permits were at an annualized rate of 1.39 million in May down from 1.44 million in April (a 3.8% drop) and 1.53 million a year ago (a 9.5% drop.)
The one hint of optimism comes from Freddie Mac’s weekly mortgage interest survey also released on Thursday. That showed that rates declined for the third week in a row. The rate for a 30-year fixed mortgage fell to 6.87% down from 6.95% last week.
