Eye On Housing
Housing production declined in July due to rising prices and limited availability of lumber and other building materials. Overall housing starts decreased 7.0% to a seasonally adjusted annual rate of 1.53 million units, according to data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
The July reading of 1.53 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 declined 4.5% to a 1.11 million seasonally adjusted annual rate. The three-month moving average (a useful gauge given recent volatility) inched up to 1.12 million starts, as charted below given past month data revisions. Single-family housing starts are up 27.2% on a year-to-date basis; however, the numbers are distorted by the weak readings of the Summer of 2020.
The multifamily sector, which includes for-rent apartment buildings and condos, was down 13.1% at a 423,000 annual rate for 2+ unit construction. After posting a slight decline in 2020, the three-month moving average for multifamily construction has been a solid 469,000 unit annual rate so far in 2021.
Builder confidence dropped to a 13-month low in August on higher material costs and high house prices, according to the NAHB/Wells Fargo Housing Market Index (HMI). After peaking at a level of 90 last November, builders report growing concerns over increasing lumber and other construction costs, as well as delays in obtaining building materials.
It is also worth noting that the number of single-family homes permitted but not started construction continued to increase in July, rising to 145,000 units. This is 56% higher than a year ago, as building material costs increase and delay some home building.
On a regional basis, combined single-family and multifamily starts are 49.3% lower in the Northeast, 6.9% lower in the Midwest, 2.1% higher in the South and 11.3% lower in the West compared to the pervious month.
As an indicator of the economic impact of housing, there are now 689,000 single-family homes under construction. This is 33.3% higher than a year ago. There are currently 684,000 apartments under construction, down 0.7% off a post-Great Recession high mark set in June 2021 (689,000). Total housing units now under construction (single-family and multifamily combined) is 14.5% higher than a year ago.
Overall housing permits increased 2.6% in July to a 1.64 million annualized rate. Single-family permits declined 1.7% to a 1.05 million annualized rate. Multifamily permits increased 11.2% to a 587,000 pace.
Looking at overall regional permit data compared to the previous month, permits are 0.7% lower in the Northeast, 4.4% higher in the Midwest, 1.9% lower in the South and 13.3% higher in the West.
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