Another difficult year for the U.S. housing market

In 2023 the U.S. residential construction decreased for the second consecutive year. 1.41 million new houses were built last year, down 9% on 2022. The outlook is negative also for the year 2024.

The U.S. housing market contracted for the second straight year in 2023, as it continued to struggle due to high mortgage rates, inflation, and labor shortages.

In the residential market, total new home starts declined in consecutive years for the first time since 2009 during the Great Recession. The 1.41 million units started in 2023 represented a 9% decrease from the preceding year.

According to U.S. Census Bureau, single-family new home starts, which comprised 66.8% of total 2023 home starts, fell 6.0% from the prior year to 944,500 units. Multi-family starts were down 14.4% from 2022 to 468,600 units.

Looking ahead, the National Association of Home Builders (NAHB) forecasts 2024 total housing starts to decrease 3.4% to 1.37 million units, with single-family starts rising 4.7% but multifamily starts decreasing 19.7% from 2023.

Existing single-family home sales in 2023 were at 3.66 million units, down 18.3% vs. the previous year and the lowest annual total since 1995. In addition to high mortgage rates hampering sales, the average sales price reached a new all-time high of $394,600.

Although new home sales rose for the first time in three years (+4.2% vs. 2022), they have still not recovered from the Great Recession and were down 47.9% from the record-high of 1.28 million units sold in 2005 (source: U.S. Census Bureau).  

As said, mortgage rates rose significantly in 2023 and were at an annual average of 6.81% (30-year fixed). This was the highest annual rate in more than two decades, or since 2001 (source: Freddie Mac).

U.S. foreclosure filings, a key inverse indicator of the housing market’s health, were up 10.1% vs. 2022. While rising for the second year in a row, foreclosure filings remained at a very low level historically and were down 87.6% from the peak level of 2.9 million in 2010. The 357,000 foreclosure filings in 2023 affected 0.26% of all U.S. housing units (source: ATTOM Data Solutions).

On a positive note, total U.S. construction spending (includes private and public residential and non-residential construction) last year reached an all-time high of $1.98 trillion, up 7% from the prior year (source: U.S. Census Bureau).