U.S. market analysis
The U.S. housing market continues to adjust in the face of ongoing economic uncertainties, fluctuating interest rates, and shifting demand dynamics. In October 2024, the residential construction market in the United States exhibited both resilience and continued signs of caution. Below, we break down the key metrics of building permits, housing starts, and completions, as reported by the U.S. Census Bureau and the Department of Housing and Urban Development (HUD) on November 19, 2024.
In October 2024, the total number of privately-owned housing units authorized by building permits reached a seasonally adjusted annual rate (SAAR) of 1,416,000 units. This represented a slight decline of 0.6% from September's revised figure of 1,425,000 units. Compared to October 2023, building permits were down by 7.7%. However, within the sector, single-family permits showed some positive movement, with a slight 0.5% increase from September, reaching 968,000 units. Meanwhile, multi-family permits for buildings with five or more units continued their downward trend, declining by 3.0% to 393,000 units.
The number of privately-owned housing starts in October 2024 came in at an annual rate of 1,311,000 units, a 3.1% decrease from September's revised estimate of 1,353,000 units. Year-over-year, this also marked a decline of 4.0%. Single-family housing starts were particularly affected, dropping by 6.9% to 970,000 units. On the other hand, multi-family housing starts (buildings with five units or more) saw a slight gain of 9.8%, reflecting some continuing interest in multi-family developments despite broader market caution.
October saw a slight contraction in the total number of housing units completed, with an annual rate of 1,614,000 units, down by 4.4% from September's 1,688,000 units. However, this figure still represents a 16.8% increase compared to October 2023, indicating that projects started earlier in the year have begun to come to fruition. The single-family sector completed 986,000 units, showing only a marginal drop of 1.4% compared to September, whereas multi-family completions (for buildings with five units or more) fell by 9.0% to 615,000 units.
The October data paints a picture of a residential construction market that is cautious but not stalled. Building permits and housing starts have experienced some contraction, indicating hesitation to initiate new projects amidst fluctuating interest rates and broader economic pressures. However, the strong year-over-year growth in housing completions highlights that, despite current challenges, developers are successfully pushing projects across the finish line.
Single-Family Sector Insights: The modest month-over-month increase in building permits for single-family homes suggests that developers are beginning to adapt to new interest rate environments and that demand for single-family units remains relatively stable. The drop in single-family starts, however, indicates ongoing caution, likely linked to persistent uncertainty around borrowing costs and labor shortages.
Multi-Family Sector Performance: Multi-family construction continues to be mixed. The decrease in permits points to a slowdown in the pipeline for future projects, yet the uptick in starts indicates that some developers are proceeding with caution. With a significant number of multi-family completions coming online, there is potential pressure on rents and vacancies in urban areas, especially if demand lags behind supply.
As we approach the end of 2024, market participants will be closely watching interest rate movements and their impact on both consumer affordability and construction costs. The upcoming November report, scheduled for release on December 18, 2024, will offer further insights into whether the cautious trends seen in October persist or if there is renewed momentum as the market adjusts to evolving conditions.
For real estate developers and investors, this landscape suggests the importance of strategic flexibility. It may be prudent to focus on projects with high demand resilience, particularly in markets where employment growth and population influx continue to support housing needs. Moreover, leveraging advanced financial modeling tools like FORGE can help developers better navigate these uncertain times by enabling dynamic cash flow projections and scenario planning, thus mitigating the risks associated with market volatility.
