Eye On Housing
Housing production jumped in March despite rising lumber and other material prices affecting the housing industry. Overall housing starts increased 19.4% percent to a seasonally adjusted annual rate of 1.74 million units, according to data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. This was the fastest pace for combined single-family and multifamily construction since June 2006.
The March reading of 1.74 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts increased 15.3% percent to a 1.24 million seasonally adjusted annual rate. The three-month moving average (a useful gauge given recent volatility) did dip to 1.16 million starts, as charted below given past month data revisions. Single-family housing starts are up 19.6% on a year-to-date basis, when comparing the first quarter of 2021 to the first quarter of 2020.
The multifamily sector, which includes apartment buildings and condos, increased 31% to a 501,000 pace in March, regaining momentum after a soft February reading.
Builder confidence remains strong in spite of supply-side challenges, according to the NAHB/Wells Fargo Housing Market Index (HMI). Builders report concerns over increasing lumber and other construction costs, as well as delays in obtaining building materials. Rising interest rates will also erode housing affordability in 2021, however rates have fallen back in recent weeks. Builders also reporting growing concerns about a more challenging regulatory environment that could limit land development volume. The NAHB forecast includes some weakening for single-family home building at the start of 2021 (off recent highs last Fall), with a return to the long-run post-Great Recession trend as the year progresses. This is consistent with the 3-month moving average data plotted above.
It is also worth noting that the number of single-family homes permitted but not started construction continued to increase in March, rising to 124,000 units. This is 39% higher than a year ago, as building material cost increases and delays slow some home building.
The February winter storm Uri held down home building in Texas and neighboring states in the central regions of the U.S. It is worth keeping in mind that about 16% of single-family home construction occurs in Texas alone. Indeed, there were outsized regional gains in March for starts in the Midwest market, although perhaps a slower rebound than expected in the South itself, which contains Texas. For example, there was a 109% gain for single-family starts in the Midwest month-over-month in March.
As an indicator of the economic impact of housing, there are now 636,000 single-family homes under construction. This is 19% higher than a year ago. There are currently 670,000 apartments under construction, off a post-Great Recession high mark set in August 2020 (683,000) and down slightly from a year ago.
On a regional basis and on a year-to-date basis, combined housing starts are 23% higher in the Northeast, 28% higher in the Midwest, 5% higher in the South, and 10% higher in the South.
Overall housing permits increased 2.7% to a 1.77 million unit annualized rate in March. Single-family permits increased 4.6% to a 1.20 million unit rate. Multifamily permits decreased 1.2% to a 567,000 pace.
Looking at regional permit data compared to the previous month, permits are 8.0% lower in the Northeast, 2.0% higher in the Midwest, 6.4% higher in the South and the West remained even.
It’s good to see that things are picking up in the housing industry. Getting people back to work in the construction industry, who may have lost jobs due to COVID, is a step in the right direction.