An 11% New Home Construction Spike

The U.S. Department of Housing and Urban Development and U.S. Census Bureau recently released a report that points out the continued growth of single-family residential starts through the month of September. More broadly speaking, overall housing production has increased 1.9% to a seasonally adjusted annual rate of 1.42 million units.

The September reading of 1.42 million starts is the number of housing units that builders would begin if they kept their current pace for the next 12 months. Digging into this number a little bit deeper, we see that single-family residential starts increased 8.5% to a 1.11 million seasonally adjusted annual rate. That’s not just a high pace. It’s the highest pace of single-family starts that we have seen in the United States since June of 2007. The multifamily sector (apartment buildings, condominiums, etc.) decreased 16.3% to a 307,000 pace.

What do we glean from this? Well. it’s certainly clear that the housing market is a boon for the U.S. economy, an economy that has struggled otherwise throughout most of 2020. Builder confidence is at an all-time high. Buyer traffic is strong. All signs seem to point to the fact that housing is helping to lift up the economy.

This buyer traffic is largely being driven by historically low interest rates and a suburban shift in demand. On the flip side of the coin, limited building material availability is slowing down some construction activities and a great deal of this buyer demand is not being met. We have seen a 22.4% rise in the number of authorized but not started single-family residential homes.

Looking at the data on regional and year-to date basis (looking at January through September of 2020 compared to that exact same timeframe a year ago), we see that combined single-family and multifamily starts are 11.0% higher in the Midwest, 5.7% higher in the South, 4.5% higher in the West, and 1.4% lower in the Northeast.

And finally, looking at regional permit data on a year-to-date basis, permits are 4.5% higher in the Midwest, 6.4% higher in the South, 0.5% higher in the West, and 4.1% lower in the Northeast.

All in all, it’s safe to say that the construction industry is healthy.