Eye On Housing
Housing production was steady in June, although permit issuance weakened as higher construction costs and other supply limitations are deferring and delaying some construction projects. Overall housing starts increased 6.3% to a seasonally adjusted annual rate of 1.64 million units, according to data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
However, single-family permits fell 6.3% in June, posting declines since March. Multifamily permits (2+ units) declined 2.6% and have been decreasing since April. Weakening permit issuance is a clear impact of higher material costs.
The June reading of 1.64 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 6.3% to a 1.16 million seasonally adjusted annual rate. Single-family housing starts are up 31% on a year-to-date basis; however, the numbers are distorted by the weak readings of the Spring of 2020. As is the case for builder confidence, starts are trending somewhat lower off peak market conditions during the 2020 rebound last Fall.
The multifamily sector, which includes for-rent apartment buildings and condos, was up 6.2% at a 483,000 annual rate for 2+ unit construction. After posting a slight decline in 2020, multifamily construction has been strong in 2021, led by gains for suburban apartment construction.
Builder confidence remains solid in spite of supply-side challenges, according to the NAHB/Wells Fargo Housing Market Index (HMI). However, after peaking at a level of 90 last November, builders report challenges concerning elevated lumber and other construction costs, as well as delays in obtaining building materials and appliances with the HMI now standing at a level of 80.
It is also worth noting that the number of single-family homes permitted but not started construction appears to be leveling off, now standing at 144,000 units. This is 58% higher than a year ago, as building material costs increase and delay some home building but it has leveled off in recent months.
Regionally, thus far in 2021, 56% of single-family construction is occurring in the South. Data from NAHB’s Home Building Geography Index indicate outsized gains for construction within markets with lower regulatory costs and greater access to developable land.
As an indicator of the economic impact of housing, there are now 675,000 single-family homes under construction. This is 32% higher than a year ago. There are currently 684,000 apartments under construction. Total housing units now under construction (single-family and multifamily combined) is 15% higher than a year ago.
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