According to a recent report by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau, housing production weakened in February as higher material costs and interest rates continue to impact the housing industry. Overall housing starts decreased 10.3% to a seasonally adjusted annual rate of 1.42 million units.
The February reading of 1.42 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts decreased 8.5% to a 1.04 million seasonally adjusted annual rate. The multifamily sector, which includes apartment buildings and condos, decreased 15.0% to a 381,000 pace.
“Despite strength in buyer traffic and lack of existing inventory, builders are slowing some production of single-family homes as lumber and other material costs, along with interest rates, continue to rise,” says Chuck Fowke, chairman of the National Association of Home Builders (NAHB), and a custom home builder from Tampa, Fla. “Shortages of lumber and other building materials, including appliances, are putting future construction expansion at risk.”
On a regional basis compared to the previous month, combined single-family and multifamily starts are 39.5% lower in the Northeast, 34.9% lower in the Midwest, 9.7% lower in the South and 17.6% higher in the West.
“While single-family starts for the first two months of the year are 6.4% higher than the first two months of 2020, there has been a 36% gain over the last 12 month of single-family homes permitted but not started as some projects have paused due to cost and availability of materials,” says NAHB chief economist Robert Dietz. “Single-family home building is forecasted to expand in 2021, but at a slower rate as housing affordability is challenged by higher mortgage rates and rising construction costs. The February winter storm Uri also held down home building in Texas and some neighboring states.”
Overall permits decreased 10.8% to a 1.68 million unit annualized rate in February. Single-family permits decreased 10.0% to a 1.14 million unit rate. Multifamily permits decreased 12.5% to a 539,000 pace.
Looking at regional permit data compared to the previous month, permits are 9.8% lower in the Northeast, 1.2% higher in the Midwest, 13.95% lower in the South and 11.3% lower in the West.