Housing starts weakened in September, driven by insufficient single-family home construction and multifamily apartment building. Single-family units fell by 4.7%, and multifamily units by 13.2%. It is understandable for homebuilders to be cautious in light of slowing home sales and some recent private sector data that indicates softening lease signings for new apartments. Nonetheless, the latest monthly annualized rate of 1.44 million is lower than the historical average of 1.5 million, which is necessary to accommodate the rising population. Moreover, nearly 6 million net new jobs have been added to the economy in the past 12 months.
The rental vacancy rate of 5.6% nationwide is at a 30-year low, and the homeowner vacancy rate of 0.8% is at a 40-year low. The inventory of homes listed for sale has gone up a bit due to lengthening days-on-market, though well below pre-pandemic inventory conditions and still near historic lows. Meanwhile, new listings coming onto the market are actually lower this year compared to last year due to the interest rate lock effect, whereby homeowners are unwilling to trade away their 3% mortgage rate.
When mortgage rates retreat after inflation is tamed in the coming years, we could again encounter an acute housing shortage.