While the single-family housing market enjoyed a strong 2020 nearly across the board, shortages in housing lots and laborers have started to flatten the curve starting in November.
According to the National Association of Homebuilders, single-family starts flattened as builders struggled to meet demand, while overall housing starts increased 1.2% to a seasonally adjusted annual rate of 1.55 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
“Though single-family construction continued to be strong in November, builders are unable to keep up with demand due to rising regulatory and construction costs and shortages of lots and labor,” says Chuck Fowke, chairman of the National Association of Home Builders (NAHB) and a custom home builder from Tampa, Fla.
“The incoming Biden administration needs to focus on policies to improve housing affordability and to increase supply to help housing continue to lead the economy forward.”
Builders Struggle to Keep Up with Demand
The November reading of 1.55 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 increased 0.4% to a 1.19 million seasonally adjusted annual rate. The multifamily sector, which includes apartment buildings and condos, increased 4.0% to a 361,000 pace.
On a regional and year-to-date basis (January through November of 2020 compared to that same time frame a year ago), combined single-family and multifamily starts are 14.4% higher in the Midwest, 7.6% higher in the South, 5.4% higher in the West and 3.3% lower in the Northeast.
“The single-family construction sector appears to be leveling off at strong levels, with permits roughly at a flat level from September to October,” adds NAHB chief economist Robert Dietz.
“Nonetheless, the growth for single-family construction was a true bright spot amid economic challenges in 2020, with single-family starts up 10% year-to-date and posting the best year since the Great Recession. However, the backlog continues to grow, with the number of single-family homes permitted but not started construction up 16.3% from November 2019 to November 2020 as material delays and higher costs hold back building.”
In addition to growth in the single-family home market, overall permits increased 6.2% to a 1.64 million unit annualized rate in November, with single-family permits increasing 1.3% to a 1.14 million unit rate. Multifamily permits increased 19.2% to a 496,000 pace.
Looking at regional permit data on a year-to-date basis, permits are 5.7% higher in the Midwest, 6.9% higher in the South, 0.7% higher in the West and 4.4% lower in the Northeast.