Due to a rise in apartment construction and a little increase in single-family house starts, home development in the United States increased by over 10% in February.
This may indicate two things: first, that renters may finally be able to escape the exorbitant rental prices of the epidemic era as inventory rises; and second, that consumers are now returning to the market to purchase homes.
After declining for six straight months, housing starts overall increased in February by 9.8% to 1.45 million units, according to a report from the US Department of Housing and Urban Development and the US Census Bureau.
That means if construction continued at this rate for the following 12 months, builders would start 1.45 million housing units. The multifamily sector, which includes apartment complexes and condos, grew by 24% in February while single-family starts increased by 1%.
Home construction is down 18% from February 2022 to February 2019, with single-family dwellings down 32%. The building of apartments, meanwhile, increased by 14% annually.
Will lower rents result from new apartments?
In the rental market, where rents swiftly increased during the pandemic, the new units should provide some respite.
In fact, there are indications that it has already begun.
The typical rent in the United States increased 18% during the previous two years, but recent data indicates that the expense of renting an apartment nationally may be slowing.
According to a Rent.com analysis, rents decreased by about 5% from November 2022 to February, with January seeing the fifth month in a row of single-digit year-over-year rises and the smallest yearly increase since June 2021.
The national median rent was down about 2% from December, despite rents rising 2.4% from a year earlier to $1,942 in January.
Is the real estate market on the mend?
According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), which was issued last month, builder confidence in the market for newly constructed single-family homes increased seven points to 42 in February, representing a second consecutive monthly improvement.
According to Robert Dietz, chief economist for the National Association of Home Builders, rising builder confidence portends a turning point for the housing market later in 2023.
“Despite a modest drop in interest rates, starts increased in February. Since long-standing issues with construction material pricing and availability continue to weigh down on the housing sector, we anticipate instability in the upcoming months “Dietz added. “However, it is anticipated that interest rates will stabilise and decline in the ensuing months, which should result in a steady upswing in single-family starts in the later half of 2023.
Regionally, total single-family and multifamily starts were 16% lower in the Northeast, 70% higher in the Midwest, 2% higher in the South, and 17% higher in the West compared to the previous month.