New Housing in Metro Areas

 Housing starts fell nearly nine percent last year to 1.41 million units, for only the second annual decline since 2009. Both the single and multifamily segments fell. Single family was down 6.0% to a preliminary 944 thousand houses, but new multifamily construction fell more sharply, down 14.4% to 469 thousand units.

Similarly, the number of housing permits also fell, although by a larger 12%. Total number of permits issued last year was 1.47 million, single family was 6.9% fewer at 908 thousand units, and multifamily was down 18.6% to 562 thousand units.

The right panel in the chart, shows monthly starts and permits data for the last two years. Latest data are for January of this year, with housing starts running at a 1.46 million unit annual rate, and permits slightly higher at a 1.49 million rate. While both starts and permits fell throughout 2022, activity stabilized most of last year.

Based on the Fed's latest pronouncements, we do not expect significant changes in mortgage rates over the next couple of months. This suggests we should not see material improvement or deterioration in the housing markets.  

Last year's decline in both housing starts and permits naturally results of declines in a majority of metropolitan areas. Although new residential construction improved in a number of metro areas.

On a geographic basis, we find that new housing construction is concentrated in a few of the metropolitan areas. The top 15 metros, depicted in the chart to the right, account for 43% of  the total housing permits issued last year. But these 15 are only 4% of all the 387 official metropolitan areas in the country. That is, just 4% of the metros represent 43% of all housing construction.

Along with the nation overall, most of these 15 metro areas saw fewer housing permits last year than in 2022, but three of them actually saw an increase. We can see in the right panel that Nashville permits were 27% higher in 2023 than the prior year, Charlotte saw 8% more permits issued and the Miami-Ft. Lauderdale metro area had 7.7% more permits. 

Note that the two top metros, Houston and Dallas, combined represent 12% of the nation's new housing construction. In other words, one in eight house permits took place in both of these areas. The top six metros in the chart account for one quarter (25%) of the nation's housing permits. And the fifteen metros shows in that chart contribute 43% of the total housing permits.

 Twenty one metro areas account for half of the total permits, and just 58 of the 387 metropolitan areas account for three-quarters (75%) of the total housing permits.

The geographic concentration of housing varies whether it's single or multifamily housing. Although several metropolitan areas are dominant in both market segments, such as Houston or Dallas-Ft. Worth, other metros predominate in either single family or multifamily housing, but not both. Such is the case of Jacksonville, Florida which shows up with high number of single family houses but vary few multifamily, or Minneapolis metro area with high number of multifamily housing but relatively few single family units.

The top single and multifamily housing markets are shown in the chart below.

Finally, for illustration purposes, the two charts below display the trend in total housing permits for each of the top 16 metro areas. The red line in each of the individual graphs represents the growth of total housing permits since 2010. That is, each point indicates the percent change in housing permits from 2010. For comparison, the U.S comparative growth is shown by the black lines. 

The numbers at the end of each line is the average growth in permits between 2010 and 2023. That is, the total growth in the number of permits divided by 14- the number of years. Also, we have colored three of the charts in pale yellow to highlight the fact that permits in these metros grew further last year, unlike the other areas where growth has stalled or fallen.