SINGLE FAMILY STARTS: Best Pace Since Spring of 2007 BY ROBERT DIETZ
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ingle-family starts experienced continued
gains in October, according to data from the U.S. Department of Housing and Urban Development and the Census Bureau. Singlefamily construction is up 8.6% year-to-date, with notable gains in 2020 for the Midwest and other lower-density markets. The pace of single-family starts in October was the highest production rate since the spring of 2007. Single-family building increased 6.4 percent to a 1.18 million seasonally adjusted annual rate. The October reading of starts was consistent with surging builder confidence, as single-family construction rises to meet strong buyer traffic, supported by low interest rates, a changing geography of demand, and a growing number of sales that have not started construction. However, builders continue to face challenges in terms of supply chain shortages of building materials and a lack of lots. Single-family permits have flattened out (rising only 0.6% in October) indicating some slowing of growth for single-family starts in the months ahead. The multifamily sector, which includes apartment buildings and condos (96% built-for-rent currently) remained flat at a 351,000 annual rate for 2+ unit production. The weakness for multifamily development is consistent with our forecast, as multifamily permits for 5+ unit production are now down more than 11% on a yearto-date basis. The year 2021 will see a decline for multifamily starts, although there will be strength for low-rise multifamily development.
rental demand, particularly in high density areas. Delays caused by material cost increases and shortages appear to be easing. For October, the count of single-family homes that have an authorized permit but have not started construction dipped to 104,000, the first decline of this count since December of 2019. On a regional and year-to-date basis (January through October of 2020 compared to that same time frame a year ago), single-family starts are up more than 10% in the Midwest – the leading region for gains. Single-family starts are up 9.1% in the West, 8.6% in the South, and 2.7% in the Northeast. Gains will continue to occur in areas with relatively higher housing affordability as telecommuting permits longer commutes.
Combined, total single-family and multifamily housing starts were up almost 5% in October and are up 6.7% on a year-to-date basis. As an indicator of the strength of the housing, there are now 564,000 single-family homes under construction. This is 8% higher than a year ago, despite the declines for construction starts in the spring. At its peak level of decline in April, single-family starts were down 34% compared to the pre-recession peak in February. There are currently 670,000 apartments under construction, off a post-Great Recession high mark set in August (683,000). This count will continue to decline in the months ahead on weakening
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