Constrained housing affordability due to high interest rates, rising construction costs, and labor shortages led to a decline in housing production in March. According to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau, overall housing starts fell by 11.4% to a seasonally adjusted annual rate of 1.32 million units.
The March figure represents the number of housing units builders would begin if development continued at this pace for the next year. Single-family starts decreased by 14.2% to a 940,000 seasonally adjusted annual rate, down 9.7% compared to March 2024. The multifamily sector, including apartment buildings and condos, saw a decrease of 3.5% to an annualized pace of 384,000.
"The drop in March housing starts is a clear signal that affordability pressures are intensifying," said Buddy Hughes, chairman of the National Association of Home Builders (NAHB) and a home builder from Lexington, N.C. "Elevated mortgage rates and rising construction costs are making it increasingly difficult to deliver homes at price points accessible to entry-level buyers."
Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis, noted that "March's decline in housing production reflects the ongoing struggle to balance construction costs with the need for affordable housing." She added that "high material prices and labor shortages continue to challenge our ability to build homes that meet the budget constraints of many families."
Regionally, combined single-family and multifamily starts were up by 8.6% in the Northeast, up by 3.3% in the Midwest, down by 8.5% in the South, and up by 10.6% in the West.
Overall permits increased by 1.6% to a 1.48-million-unit annualized rate in March. Single-family permits decreased by 2% to a rate of 978,000 units while multifamily permits rose by 9.3% to a pace of 504,000.
Year-to-date regional permit data showed decreases of 24.7% in the Northeast and increases of 4.7% in the Midwest; permits were slightly higher by 0.4% in the South but fell by 8.8% in the West.
In March, there were approximately 632,000 single-family homes under construction while apartments under construction totaled about 759,000 units.
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