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PNC Senior Economist Abbey Omodunbi: Housing Starts and Permits Fell in 2022

Michigan Business Network
January 23, 2023 1:00 PM

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As Higher Mortgage Rates Weighed on Housing Activity

  • Housing starts in December edged down 1.4% to 1.382 million annualized units.
  • Housing permits fell 1.6% in December to 1.330 million annualized units.
  • The housing market recession will likely continue through most of 2023.

The U.S. Census Bureau reported this morning that housing starts edged down 1.4% in December to 1.382 million annualized units, better than consensus expectations for a 4.8% decline to 1.358 million annualized units. Starts in November were revised slightly lower to 1.401 million from 1.427 million. Single-family starts rose 11.3% while multi-family starts fell 19.0%. 

Residential construction permits were down 1.6% to 1.330 million in December. Single-family permits fell 6.5% to 730,000. Multi-family permits rose 5.3% to 600,000. Building completions fell 8.4% in December but were up 6.4% from December 2021. Total housing starts fell 3.0% in 2022 after rising 16.0% in 2021. Single-family starts were down 10.6% last year after surging 13.8% in 2021.

The housing sector downturn continued in December amid high mortgage rates and elevated inflation. In a separate report released yesterday, homebuilder confidence as measured by the NAHB Market Index increased to 35 in January. This marks the first improvement in sentiment since December 2021.

Construction employment has remained resilient despite the Fed’s very hawkish stance. Construction employment rose 28,000 in December and 231,000 in 2022. The increase in construction employment is likely due to the large backlog of projects caused by supply-chain issues. The number of multi-family units under construction is at the highest level since 1973. PNC expects further declines in homebuilding this year as the Fed continues its hiking cycle. PNC’s baseline forecast is for the housing sector to lead the broader economy into a three-quarter recession that starts in the spring of 2023.

The PNC Financial Services Group, Inc. is one of the largest diversified financial services institutions in the United States, organized around its customers and communities for strong relationships and local delivery of retail and business banking including a full range of lending products; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management and asset management. For information about PNC, visit www.pnc.com.

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