Housing starts are on the rise, everyone celebrate! We’ve been saying for years that the market will continue to choke out would-be homebuyers if permits and starts don’t improve, and we’re finally seeing a glimmer of hope, but unfortunately it’s pretty exclusively in the multi-family sector.
According to the U.S. Commerce Department, housing starts jumped 3.9% in August, beating economists’ expectations, with construction material pricing easing and allowing for more new builds. But again, the surge was led by multi-family (up a whopping 20.6% for the month), while single family housing starts actually fell 2.8%, and permits for that sector stagnated.
“There is certainly a housing shortage, as reflected in the low inventory of homes for sale and in low rental vacancy rates,” observed National Association of Realtors’ Chief Economist, Dr. Lawrence Yun. “However, a shift toward rental buildings means less access to homeownership over the long run and the accompanying opportunity for wealth gains.”
This summer, NAR called for lawmakers from local to federal to take “once-in-a-generation action” to address the housing supply crisis.
Now, Dr. Yun noted that “given the housing shortage and the lack of big increases in the construction of single-family homes, home prices will continue to move higher than most people’s income gains,” despite price gains skyrocketing 20% gains in the first half of this year.
“That’s good news for property owners,” said Dr. Yun, “but bad news for those wanting to become homeowners.”
In coming months, single-family housing starts are expected to slow, not just for seasonality reasons, but as a result of thousands of people trading in their city life for a suburban life as a reaction to a global pandemic.
Home builders’ permits are up 50% nationally compared to this time last year when supply chains were obliterated by COVID, and China’s real estate problems are not expected to have a strong ripple effect in housing stateside, although a temporary stock market retraction has been felt.
Homebuilder sentiment just rose for the first time in three months, according to the National Association of Home Builders (NAHB) which pointed to a rise in buyer traffic and (finally) falling lumber prices, which they said has added an average of $30K in cost to a new home in America.
“The September data show stability as some building material cost challenges ease, particularly for softwood lumber. However, delivery times remain extended and the chronic construction labor shortage is expected to persist as the overall labor market recovers,” said NAHB Chairman, Dr. Chuck Fowke.