Homebuilding Sputters Through Year-End

Blog

Stay up to date on timely topics and market events. Subscribe to our Blog now.

Single-family housing starts rose 3.3% in December to an annualized rate of 1.05 million per year. That brings the average level of single-family starts for the second half of 2024 (2H24) to 0.99 million units per year, down about 5% from the 1H24 average and down 9% from the 2023 level. In other words, the December gain was modest, and our take is that it represents mostly catch-up from activity levels in late summer and early fall that were restrained by the hurricanes buffeting the South.

This contention is further supported by the facts, first, that single-family starts in the South have been elevated over the last two months, and second, that even those increases leave 2H24 starts in the South about 9% below the average for 1H24.

Explore Sales and Starts of New, Single-Family Homes

It is true that single-family homebuilding has not seen the much larger declines that we were expecting. Both nationwide and Southern single-family starts finished 2024 7% below 2023 totals, whereas we were thinking a decline of 20% was in the cards. We based that forecast on the fact that starts for the last four years have consistently come in much higher than was consistent with new-home sales rates, so that inventories of new homes have become extremely high.

Meanwhile, there is also the reality of much higher mortgage rates. Although high inventories and mortgage rates have not as yet severely weakened single-family homebuilding, activity is not increasing. And, recently, mortgages rates have ticked yet higher, rising above 7%. While homebuilding rates have held up better than expected, we still are inclined to think that high inventories—thus high carrying costs for builders—and the lack of any substantive increase in new-home sales will eventually lead to another move significantly lower in single-family home construction rates.

Multi-family starts rose a hefty 118.5% in December. This too looks to be catch-up from low rates during the hurricane months, as most of the December gain indeed occurred in the South. However, even this elevated December level left the 2H24 average for multi-family starts well below the 1H24 and 2023 levels.

Multi-family activity has clearly been weaker over the last year, with the 2024 multi-family starts total down 27.7% from the 2023 level and down 35% from the 2022 level. Even with these declines, builders are still completing 50,000 multi-family units per month, far more than we think the housing market can absorb.

© Western Asset Management Company, LLC 2025. The information contained in these materials ("the materials") is intended for the exclusive use of the designated recipient ("the recipient"). This information is proprietary and confidential and may contain commercially sensitive information, and may not be copied, reproduced or republished, in whole or in part, without the prior written consent of Western Asset Management Company ("Western Asset").

Past performance does not predict future returns. These materials should not be deemed to be a prediction or projection of future performance. These materials are intended for investment professionals including professional clients, eligible counterparties, and qualified investors only.

These materials have been produced for illustrative and informational purposes only. These materials contain Western Asset's opinions and beliefs as of the date designated on the materials; these views are subject to change and may not reflect real-time market developments and investment views.

Third party data may be used throughout the materials, and this data is believed to be accurate to the best of Western Asset's knowledge at the time of publication, but cannot be guaranteed. These materials may also contain strategy or product awards or rankings from independent third parties or industry publications which are based on unbiased quantitative and/or qualitative information determined independently by each third party or publication. In some cases, Western Asset may subscribe to these third party's standard industry services or publications. These standard subscriptions and services are available to all asset managers and do not influence rankings or awards in any way.

Investment strategies or products discussed herein may involve a high degree of risk, including the loss of some or all capital. Investments in any products or strategies described in these materials may be volatile, and investors should have the financial ability and willingness to accept such risks.

Unless otherwise noted, investment performance contained in these materials is reflective of a strategy composite. All other strategy data and information included in these materials reflects a representative portfolio which is an account in the composite that Western Asset believes most closely reflects the current portfolio management style of the strategy. Performance is not a consideration in the selection of the representative portfolio. The characteristics of the representative portfolio shown may differ from other accounts in the composite. Information regarding the representative portfolio and the other accounts in the composite are available upon request. Statements in these materials should not be considered investment advice. References, either general or specific, to securities and/or issuers in the materials are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendation to purchase or sell such securities. Employees and/or clients of Western Asset may have a position in the securities or issuers mentioned.

These materials are not intended to provide, and should not be relied on for, accounting, legal, tax, investment or other advice. The recipient should consult its own counsel, accountant, investment, tax, and any other advisers for this advice, including economic risks and merits, related to making an investment with Western Asset. The recipient is responsible for observing the applicable laws and regulations of their country of residence.

Founded in 1971, Western Asset Management Company is a global fixed-income investment manager with offices in Pasadena, New York, London, Singapore, Tokyo, Melbourne, São Paulo, Hong Kong, and Zürich. Western Asset is a wholly owned subsidiary of Franklin Resources, Inc. but operates autonomously. Western Asset is comprised of six legal entities across the globe, each with distinct regional registrations: Western Asset Management Company, LLC, a registered Investment Adviser with the Securities and Exchange Commission; Western Asset Management Company Ltda. is regulated by Comissão de Valores Mobiliários; Western Asset Management Company Pty Ltd ABN 41 117 767 923 is the holder of the Australian Financial Services License 303160; Western Asset Management Company Pte. Ltd. Co. Reg. No. 200007692R is a holder of a Capital Markets Services License for fund management and regulated by the Monetary Authority of Singapore; Western Asset Management Company Ltd, a registered Financial Instruments Business Operator and regulated by the Financial Services Agency of Japan; and Western Asset Management Company Limited is authorised and regulated by the Financial Conduct Authority ("FCA") (FRN 145930). This communication is intended for distribution to Professional Clients only if deemed to be a financial promotion in the UK as defined by the FCA. This communication may also be intended for certain EEA countries where Western Asset has been granted permission to do so. For the current list of the approved EEA countries please contact Western Asset at +44 (0)20 7422 3000.