In another sign that builders are putting down their tools, housing starts — or the number of homes that began construction in a given period — declined a sharp 9.6 percent in July, with single-family homes leading the drop-off. This is the second indicator in as many days that the housing market is entering a slow period, and possibly a recession. On Monday, the National Association of Home Builders (NAHB) /Wells Fargo Housing Market Index, which measures builder confidence, dropped into negative territory.
“A housing recession is underway with builder sentiment falling for eight consecutive months while the pace of single-family home building has declined for the last five months,” said Robert Dietz, chief economist for NAHB, in a statement.
Like the economy writ large, however, it’s not all bad for housing. While single-family construction fell, multifamily is ramping up. Building permits fell 1.3 percent from June but are up 1.1 percent from last year, due in large part to relative strength in multifamily housing. “The number of multifamily 5+ units currently under construction is up 24.8 percent year-over-year,” Dietz said. The growing interest in multifamily hasn’t been lost on investors. Silicon Valley venture capital firm Andreessen Horowitz on Monday announced that it’s pledging $350 million to Flow. The company, which was founded by former WeWork CEO Adam Neumann, is ostensibly focused on the rental housing market — though details about its exact business model are sparse.
Another wrinkle in the downbeat outlook for housing: The situation varies significantly by geography. Housing starts were up 65.5 percent in the Northeast, but were down 33.8 percent in the Midwest and 18.7 percent in the South, according to Oxford Economics. The latter areas experienced a boom in housing demand during the pandemic but are now sliding the most. Still, despite slowing construction and falling demand, housing prices remain historically unaffordable. NAHB found that just 42.8 percent of the new and existing homes sold in the second quarter were affordable to families making the median salary of $90,000. That number was 56.9 percent in the first quarter. This loss of affordability is taking place against the backdrop of a nationwide housing shortage. One measure said the U.S. is 3.8 million homes short of meeting housing needs. This suggests that while short-term demand is falling, in large part due to higher mortgage rates, more housing is still sorely needed. Marc Andreessen highlighted the problem in his blog post announcing Andreessen Horowitz’s investment in Flow. “The demographic trends driving America’s housing market are impossible to ignore: our country is creating households faster than we’re building houses,” he wrote. “Structural shortages in available homes for sale push housing prices higher, while young people are staying single for longer and increasingly concentrating in highly desirable urban centers.” Yet builders remain wary about moving ahead with projects. The total number of housing units that were authorized by permits but have not yet begun construction jumped 5 percent to 296,000, which is a new record. This backlog does mean that housing starts could pick up in the coming months, even as permit issues slow, but it’s also possible that order cancellations will jump.
New data from Redfin shows that about 63,000 home-purchase agreements were canceled in July. That means 16 percent of all homes that were under contract that month fell through, which is the highest rate in more than two years. On one hand, this means buyers are walking away without their dream home. On the other, it could suggest that buyers have more leverage. “Homes are sitting on the market longer now, so buyers realize they have more options and more room to negotiate,” said Heather Kruayai, a Redfin real estate agent in Jacksonville, Florida, in a press release. “They’re asking for repairs, concessions and contingencies, and if sellers say no, they’re backing out and moving on because they’re confident they can find something better.”
Perhaps whatever Adam Neumann is cooking up will fit the bill. NN: i am sick and tired of hearing the spin about this great demand for housing… See it gets into the fact that want and get are two different things. So yes the surveys are correct millions of people want a house… But hold on to you poope cushion… They WANT a house for sure. But their is another part of the equation we do not want to forget. You got to have the money and income and be able to afford it BEFORE YOU GET IT NEVER MIND KEEP IT. And more and more Americans can afford the rent or a Walmart tent. As interest carry costs skyrocket and inflation makes the materials and labor to build a house more and more expensive home owner ship becomes a metarverse illusion.