Report: As Interest Rates Climb, Multi-family Construction in Metro Detroit Surges

Based on new residential permit data compiled by the Home Builders Association of Southeastern Michigan (HBA) in Bingham Farms and reported in the HBA and Carter Lumber Southeastern Michigan Residential Building Activity Report, single-family home permits continued to drop, registering 319 units in June.
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Concrete Highrise Construction Site
Climbing interest rates and increased home prices have caused a surge of multi-family construction in metro Detroit. // Stock Photo

Based on new residential permit data compiled by the Home Builders Association of Southeastern Michigan (HBA) in Bingham Farms and reported in the HBA and Carter Lumber Southeastern Michigan Residential Building Activity Report, single-family home permits continued to drop, registering 319 units in June.

That number is down 12 percent from May 2022’s revised total of 360 permits, and down 35 percent from June 2021’s total of 488. One reason, perhaps, is the average value of a permit increasing 25 percent year-over-year to its highest point since the organization began tracking the metric in January 2012 — $372,351. This is a 9.5 percent month-over-month increase.

All the while, multi-family construction continued its surge, adding 228 permits in June, bringing the year-to-date total to 1,557, the most to start a year since 1998. The growth is coming from the affordability issue facing new home construction, with the 30-year fixed mortgage rate rising another 6.42 percent in June, representing 2.7 basis points over June 2021.

Material and labor cost inputs to new construction continue to be up significantly, specifically lumber and oil prices, compared to pre-pandemic levels, even while lumber has decreased from its recent peak price.

Other industry metrics the HBA factors into its projections show a mixed bag. The labor situation is largely unchanged, with the total number of employed people down 1.2 percent month-over-month and up 2.4 percent year-over-year. The available workforce is down 0.5 percent month-over-month and up 0.6 percent year-over-year.

Crude oil prices continue to rise, with the per barrel price up 10.2 percent year-over-year to $113.23, and up 82.5 percent year-over-year. Despite these prices, North American vehicle production is up 3.7 percent month-over-month and 16.5 percent year-over-year.

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