Housing starts reach highest point of the pandemic era
The momentum of construction activity continued in October as single-family housing starts hit their highest points since February, according to the Census Bureau and the Department of Housing and Urban Development.
Residential starts grew 4.9% from September and 14.2% year-over-year to a seasonally adjusted annualized rate of 1.53 million. Broken down by region, the South led in annual growth, jumping 24.3%, with the Midwest right behind at 23%. The West increased by 5.4%, while the Northeast dropped 32.8%. The overall rise could potentially quell the surge in home prices by helping to increase housing inventory, which recently hit a 13-year low. Homebuilder sentiment also reached its all-time high in November, fueled by robust consumer demand.
"With homebuilders maintaining an incredible pace not seen in years, even well into the fall, brokers should view this as a clear sign they will continue assisting purchase clients throughout the rest of the year," Austin Niemiec, executive vice president of Rocket Pro TPO, said in a statement.
Permits, a barometer for upcoming construction, held month-over-month at about 1.55 million — the highest level of 2020. It represents a 2.8% rise from October 2019. Authorized permits yet to break ground declined to 179,000 in October, down 0.6% from September and 4.3% the year prior.
Homes under construction rose to over 1.22 million, up 1.2% monthly and 6% annually. Meanwhile, completed construction fell to 1.34 million units in the short term, it grew 5.4% from October 2019.
Although the majority of indicators for increased building point up, there are still political and logistical hurdles to clear, as well as possible lockdowns resulting from the pandemic's next wave.
"The current housing market is characterized by robust demand, but not enough homes for sale," said First American deputy chief economist Odeta Kushi. "Despite record-low inventory of existing homes for sale, construction activity has lagged. The construction industry faces several supply-side headwinds: increasing material costs (specifically rising lumber costs), a chronic lack of construction workers, a dearth of buildable lots, and restrictive regulatory requirements in many markets."