Homebuilding Is Booming – But Will It Be Enough?
While new-home numbers are up 8% year-to-year, it’s still not enough compared to buyer demand – but an uptick in permits suggests things will get better.
WASHINGTON – At the beginning of October, new-home starts were up more than 8% compared to a year ago. But that increase still isn’t enough to meet demand, says Lawrence Yun, chief economist of the National Association of Realtors® (NAR).
September housing starts were at a 1.42-million-unit production level on an annualized basis, which isn’t enough – but Yun says the annualized number of permits reported, 1.55 million homes, will better meet housing demand. Permits are considered a leading sign for the number of future home starts.
Rising lumber prices and a shortage of construction workers continue to constrain homebuilding, Yun says. Bloomberg reports that buyers spend $4,600 more, on average, than they did six months ago for just oriented strand board (OSB), which was once a low-cost alternative to plywood. OSB is made of waterproof heat-cured adhesives and shaped wood strands.
Still, September’s home-building pace was the highest for single-family starts since June 2007, according to the National Association of Home Builders. Starts in the multifamily sector, which includes condos and apartments, continue to struggle amid the pandemic, however, dropping 16.3% last month to a pace of 307,000.
“The housing market remains a bright spot in the U.S. economy, and that is reflected in the positive housing starts report,” says Chuck Fowke, chairman of NAHB. “Builder confidence is at an all-time high as buyer traffic is strong – another sign that housing is helping to lift the economy.”
On a regional basis, combined single-family and multifamily housing starts from January through September were highest in the Midwest, an 11% increase, followed by a 5.7% gain in the South and a 4.5% increase in the West. Homebuilding was down 1.4% in the Northeast, the Commerce Department’s data shows.
New-home construction likely will stay elevated over the months to come.
“Home sales have exceeded for-sale construction recently, which means additional homebuilding in the near term,” says Robert Dietz, NAHB’s chief economist. “Demand is being supported by low interest rates, a suburban shift in demand, and demographic tailwinds. However, headwinds due to limited building material availability is slowing some construction activity despite strong demand, with authorized-but-not-started single-family homes up 22.4% compared to a year ago.”
Source: National Association of REALTORS® and National Association of Home Builders
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