Dodge Construction Network released its September report last week, showing declines across three major construction sectors. The residential sector “led the tumble,” the firm’s analysts said, falling by 6%, at 394,000 starts. Total starts for August were 419,842.

source: Dodge Construction Network

A closer look shows that single-family starts offered a small silver lining, gaining by 1% on a monthly basis. The multifamily sector fell by 17%.

Total construction starts across nonresidential, residential and nonbuilding construction (including infrastructure), fell in September by 6%, to a seasonally adjusted annual rate of $1.2 trillion.

“Kind of a downer month for September, when you look at the data,” said Dodge chief economist Richard Branch. “Construction starts fell 6% from August. Non-residential buildings were down 4%. Residential buildings were down 6% … so when we look back on the last 12 months of construction activity, we’re essentially flat.”

A return to “broad-based growth” in construction starts isn’t expected in the near term, Branch said.

Source: Dodge Construction Network

On a year-to-date basis through September 2023, total residential starts were down 17%. Single family starts were 19% lower, and multifamily starts were down 12%.

For the past 12 months ending in September 2023, residential starts were 16% lower than in 2022. Single family starts were 22% lower, while multifamily starts were down 5% on a rolling 12-month basis.

“Challenges continue to mound for construction,” Branch said. “We’re in a high-interest-rate environment. Interest rates will probably stay high until at least the summer of 2024. That’s when we think the [Federal Reserve] will start to cut rates.”

Credit standards remain tight, Branch said, and there are a lot of “externalities” facing the industry, including added risks. Factors include higher energy prices and geopolitical risk, regarding whether or not Congress can get appropriation bills done on time for the current fiscal year, which began October 1.

Among the largest multifamily projects breaking ground in September were the first phase of the South Pier Residential Towers in Tempe, Ariz., at $385 million, and the $275 million first phase of the Casa Bella Condominiums in Miami, Fla. The $260 million Chapel Block mixed-use development in Philadelphia, Pa., also broke ground.

Regionally, total construction starts in September fell in the Northeast, Midwest, South Atlantic and West regions, but rose slightly in the South Central.

“Overall, we’re expecting construction starts to be pretty flat in 2023 even into the first quarter of 2024. We don’t expect a lot of positive momentum in the first quarter of next year either, but once we get into the summer of 2024, we think that that’s where we’ll start to see some more organic growth develop in the construction sector.”

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