The National Association of Homebuilders is projecting that single-family production will fall to in 2023, but start to rebound in 2024. NAHB made their annual forecast at this year’s International Builders Show in Las Vegas.
NAHB’s chief economist Robert Dietz notes that the 2023 declines in building activity will feel more dramatic as production was running above a 1.1 million annualized pace through the first quarter of 2022 before beginning a steep decline as mortgage rates rose rapidly and buying activity plummeted.
“With interest rates projected to normalize in the second half of 2023 as the Federal Reserve taps the brakes in its fight against inflation, the pace of single-family construction will bottom out in the first half of 2023 and begin to improve in the latter part of the year,” said Robert Dietz, chief economist of the National Association of Home Builders (NAHB).
NAHB is projecting that single-family production will fall to 744,000 units this year before rebounding to a 925,000 annual pace in 2024. NAHB predicts multifamily construction will also fall in 2023 after a very robust 2022.
The forecast calls for multifamily starts to fall 28% this year to a 391,000 total and will stabilize in 2024 at about 374,000 starts. NAHB notes that there are currently more than 940,000 apartments under construction, the highest total since 1973.
With inflation expected to decelerate in 2023, Deitz expects interest rates to follow which will bring homebuyers back to the market.
“This forward momentum will lead to a calendar year gain for single-family starts in 2024,” said Dietz
The slowdown in new home construction in 2022 and 2023 will leave the housing market even more undersupplied than it was. NAHB estimates we have a structural housing deficit of 1.5 million residences in the U.S. According to NAHB, in order to house the country’s current home buyer demographics, single-family home building will need to exceed 1.1 million starts per year in order to reduce the deficit from under building in the prior decade.