Eye On Housing
Single-family starts leveled off in November, according to data from the U.S. Department of Housing and Urban Development and the Census Bureau. Single-family construction is up 10.1% year-to-date, with notable gains in 2020 for the Midwest, parts of the West and other lower-density markets.
The pace of single-family starts in November was the highest production rate since the spring of 2007. Single-family building increased slightly by 0.4 percent to a 1.19 million seasonally adjusted annual rate. The November reading of starts was consistent with a similar leveling off for builder confidence at strong readings, as single-family construction needs to rise to meet strong buyer traffic, supported by low interest rates, a changing geography of demand, and a growing number of sales that have not started construction. However, builders continue to face challenges in terms of supply chain shortages of building materials and a lack of lots. Single-family permits have also flattened out (rising just 1.3% in November) indicating some slowing of growth for single-family starts in the months ahead.
The multifamily sector, which includes apartment buildings and condos (96% built-for-rent currently) showed a gain, rising to a 361,000 annual rate for 2+ unit production. Weakness for multifamily development is expected in 2021, as multifamily permits for 5+ unit production are now down more than 11% on a year-to-date basis. However, there will be relative strength for low-rise multifamily development.
Combined, total single-family and multifamily housing starts were up more than 1% in November and are up 7% on a year-to-date basis.
As an indicator of the strength of the housing, there are now 589,000 single-family homes under construction. This is 12.8% 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 665,000 apartments under construction, off a post-Great Recession high mark set in August (683,000). This count will continue to decline in the months ahead on weakening rental demand, particularly in high density areas.
For November, the count of single-family homes that have an authorized permit but have not started construction increased to 107,000, a 16.3% gain from a year ago as backlog grows amid strong buyer demand.
On a regional and year-to-date basis (January through November of 2020 compared to that same time-frame a year ago), single-family starts are up 11% in the Midwest and the West – the leading regions. Single-family starts are up 10% in the South, and just under 2% in the Northeast. Gains will continue to occur in areas with relatively higher housing affordability as telecommuting permits longer commutes.
Level off? Not surprising when building cost double or triple in a matter of weeks. This climate of supply chain volatility has got to be corrected. Builders should not be expected to risk bankruptcy in order to build homes, and neither should consumers. When a builder is given a quote for supplies, then initiates a build based on those figures, suppliers should be COMPELLED BY LAW to honor those quotes that they provided for a reasonable period of time. To get a quote, initiate a build, and then go back a few weeks later to place the order only to find that prices have doubled or tripled is simply price gouging and price fixing by suppliers. It is monopolistic practices such as these that compel governments to break up companies that exploit unfair market control. Look at the stock market prices of lumber suppliers and then try to tell me with a straight face how they have been damaged by Covid.