Slight Decline for January Single-Family Starts

Single-family starts dipped somewhat in January, as ongoing supply-chain issues are adding cost and construction time to home building. The availability of labor and lots also remain key headwinds, with labor likely to become more challenging in 2022.

Overall housing starts decreased 4.1% to a seasonally adjusted annual rate of 1.64 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. However, in a sign of strong demand, building permits increased at a solid pace in January. Single-family permits increased 6.8% for the month.

The January 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 decreased 5.6% to a 1.12 million seasonally adjusted annual rate. The multifamily sector, which includes apartment buildings and condos, decreased 0.8% to an annualized 522,000 pace.

Due to supply-chain effects, there are 151,000 single-family units authorized but not started construction—up 32.5% from a year ago. However, this total is down from a cycle high in October of 154,000.

In February, single-family builder confidence decreased one point to a level 82 on strong buyer demand, according to the NAHB/Wells Fargo Housing Market Index (HMI). After peaking at a level of 90 in November 2020, builders have reported ongoing concerns over elevated lumber, OSB and other construction costs, as well as delays in obtaining building materials. The NAHB forecast projects growing labor shortages as the overall unemployment rate trends lower in the quarters ahead.

On a regional basis compared to the previous month, combined single-family and multifamily starts are 2.6% higher in the Northeast, 37.7% lower in the Midwest, 2.0% lower in the South and 17.7% higher in the West.

As an indicator of the economic impact of housing, there are now 785,000 single-family homes under construction. This is 27% higher than a year ago. There are currently 758,000 apartments under construction, up 14% from a year ago. Total housing units now under construction (single-family and multifamily combined) is 20% higher than a year ago. The number of units under construction is rising on both the total volume of construction, as well as longer construction times.