Pent-up demand and a dearth of existing homes for sale are fueling single-family construction across the country, while oversupply is weighing down multifamily development.
Year-over-year growth rates for U.S. single-family markets, as measured by building permits, increased in the second quarter, adding to gains posted in the first quarter, according to an analysis of U.S. Census data by the National Association of Home Builders.
However, the trade group's Home Building Geography Index shows a downward trend in permits for multifamily after record completions and a rental boom that started during the pandemic. According to the builders association, more than 900,000 apartments are under construction in the country, the most since 1973.
Tougher financing also is playing a role in the slowdown, the group said.
In the first quarter, multifamily starts fell 63% over the prior 12 months to 67,000 and dropped even more in the second quarter to 58,000 units, the lowest quarterly total since 2011, according to CoStar Analytics.
While the Federal Reserve has signaled a lowering of mortgage rates this month, elevated rates in recent years have curtailed demand from buyers. Both single-family and multifamily builders are navigating other challenges, such as labor shortages and supply-chain issues, the builders group noted.