U.S. residential construction declines for the first time

In 2022 the U.S. residential construction decreased for the first time since 2007. 1.56 million new houses were built last year, down 2,9% on 2021. The outlook is negative also for the year 2023.

In the year 2022 the U.S. residential building sector slowed due to rising mortgage rates and inflation, supply chain issues, and labor shortages.

Total new home starts declined for the first time since the beginning of the Great Recession in 2007. The 1.56 million units started in 2022 were a 2.9% decrease from the preceding year. According to U.S. Census Bureau, single-family new home starts, which made up 64.6% of total 2022 home starts, fell 10.8% from the prior year to 1.005 million units. Multi-family starts were up 16.0% from 2021 to 549,600 units.

Looking ahead, the National Association of Home Builders (NAHB) forecasts 2023 new single-family and multifamily starts to decrease 26.0% and 28.0%, respectively, from 2022.

Hindered by rising mortgage rates and record-high average sales prices ($526,000 in 2022, up 16.2% from 2021), new single-family home sales fell for the second year in a row.

The 644,000 units sold in 2022 represented a 16.4% decline from the previous year (source: U.S. Census Bureau). Though U.S. foreclosure filings, a key inverse indicator of the housing market’s health, more than doubled from 2021 to last year, they were still at their third lowest level on record. The 324,000 foreclosure filings (0.23% of all U.S. housing units) in 2022 represented a 114.5% increase from the preceding year (source: ATTOM Data Solutions).

Adding to issues with housing affordability, the average 30-year fixed mortgage rate jumped from 2.96% in 2021 to 5.34% in 2022, the highest annual rate since 2008 (source: Freddie Mac). On a positive note, the U.S. unemployment rate in 2022 was 3.6%, down from 5.3% the previous year and the lowest rate since 1969.

Total U.S. construction spending (includes private and public residential and non-residential construction) last year reached an all-time high of $1.79 trillion, up 10.2% from 2021 (source: U.S. Census Bureau).