Single-family construction permits decline nationwide

Year-to-date issuance of single-family construction permits declined by more than 5% annually in July, according to the National Association of Home Builders, as the building industry continues facing the headwinds of accelerating interest rates and supply shortages.

The number of permits issued totaled 645,877 year-to-date in July, down 5.3% from the same month last year, with declines occurring in all geographic regions across the country. The Midwest saw the greatest year-over-year decrease at 10.9%, followed by the Northeast where 9.6% fewer permits were issued. The West experienced a 6.8% decline, with the South saw the smallest drop of 3%. 

The combined total of the top ten states issuing single-family permits accounted for 64.0% of the overall volume, the NAHB reported.

Only eight states reported an increase in year-to-date numbers from July 2021 to 2022, with New Mexico upping its total 39.1% from 3,485 permits to 4,847 to lead the country. The remaining 42 states and District of Columbia all posted declines, with Pennsylvania seeing the largest drop of 21.3%, from 12,787 permits to 10,066. 

The slowdown in single-family construction permits and starts over the past several months are a result of compounding factors, according to researchers at the Harvard Joint Center for Housing Studies. Permit issuances are forerunners of housing starts.  

“Rising interest rates and deteriorating affordability have significantly affected new housing supply,” said Alexander Hermann, senior research analyst, in a presentation Friday on updates in the center’s 2022 State of the Nation’s Housing report. Supply issues and prices also are having an impact on builders’ production levels.

“Rising costs are related to shortages of building materials that make new housing construction difficult to complete and bring to market,” Hermann said. 

“As of February, inputs to new residential construction are rising 20% year-over-year, and that includes substantial rises in plastic construction products and chips, and clay, tile concrete and more,” he said. 

Two Texas markets led the country in the volume of single-family permits issued year to date in July, the NAHB said. Houston reported a total of 32,218, followed by Dallas-Fort Worth with 29,673. Phoenix came in third at 19,821.

Running contrary to single-family trends, though, were multifamily permit issuances. A total of 37 states and the District of Columbia recorded growth in their year-to-date multifamily-permit numbers. Issuances jumped 20% nationwide to 394,215 from 328,483 between July 2021 and July 2022, with Georgia seeing the greatest growth at 178.9%, surging to 14,133 from 5,067.