Home Building Continues Historic Climb


Single-family starts experienced continued gains in September, according to data from the U.S. Department of Housing and Urban Development and the Census Bureau. Contrasting the different subsectors of housing, while single-family permits are showing continued strength, multifamily permits continue to weaken as a consequence of the 2020 virus crisis.

The pace of single-family starts in September was the highest production rate since the summer of 2007. Single-family building increased 8.5 percent to a 1.1 million seasonally adjusted annual rate. The September reading of starts was consistent with surging builder confidence, as single-family construction rises to meet strong buyer traffic, supported by low interest rates, changing geography of demand, and a growing number of sales that have not started construction. However, builders continue to face challenges in terms of elevated lumber prices and supply chain shortages of other building materials.

The multifamily sector, which includes apartment buildings and condos (96% built-for-rent currently), decreased to a 307,000 annual pace. The weakness for multifamily development is consistent with our forecast, as multifamily permits for 5+ unit production are now down more than 8% on a year-to-date basis.

Total housing starts were up almost 2% in September on the decline for multifamily construction. Single-family permits continue to rise and are now up 9.9% on a year-to-date basis.

As an indicator of the strength of the housing rebound, there are now 539,000 single-family homes under construction. This is 3% higher than a year ago, despite the declines for construction starts in the Spring. At its peak level of decline in April, single-family starts were down 34% compared to the pre-recession peak in February.

There are currently 670,000 apartments under construction, off a post-Great Recession high mark set in August (684,000). This count will continue to decline in the months ahead on weakening rental demand, particularly in high density areas.

Material cost increases and shortages are having an impact on the construction pipeline. For August, the count of single-family homes that have an authorized permit but have not started construction totaled 104,000, a 22.4% increase compared to a year ago. Builders are reporting growing delays due to these supply-chain issues.

On a regional and year-to-date basis (January through September of 2020 compared to that same time frame a year ago), combined single-family and multifamily starts are 11 percent higher in the Midwest, 5.7 percent higher in the South, 4.5 percent higher in the West and 1.4 percent lower in the Northeast.


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1 reply

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