Instant Reaction Housing Starts, July 17, 2024

New apartment units completed reached a 50-year high in June. That is truly a wow. The rents have stopped rising in many cities due to the oversupply of rental units. Rents whether on apartments or on single-family rentals have fallen in Austin, Nashville, Charlotte, and Phoenix where the supply has been even more overwhelming. This indicates that rent controls are not needed, but just more supply to address housing affordability. But the concern is that new multifamily housing starts year-to-date are around 10-year lows. The high financing costs and low current rent growth have reduced the incentive to build. The current supply is due to active construction starts of the past. It takes around two years to finish apartment construction. Perhaps, there will be a rental housing shortage in a couple of years.

Single-family housing completion was above 1 million, which is decent, though more would help. But single-family housing starts were below one million in the latest month. The Fed policy of high interest rates, counterintuitively, could raise inflation in future years. Lower interest rates soon will lead to more housing supply and lower future housing inflation.