August starts better than expected

U.S. homebuilders began construction on 1.615 million homes in August, up 3.9% from July 2021 and 17.4% more than a year ago, according to a new report from the United States Census Bureau and the US Department of Housing and Urban Development.

Nationwide, 1.728 million building permits were withdrawn, 6% more than the revised rate of the previous month and 13.5% more than the rate of August 2020. In addition, 1.33 million housing units were completed, down 4.5% from July 2021, but still 9.4% more than the previous year.

“The monthly increase in permits and starts in August indicates that builders are reacting eagerly to near-record rates, a limited supply of existing homes for sale and strong demand driven by millennials who become homeowners. ” American Premier Deputy chief economist Odeta Kushi said in a statement.

The increase comes as builders continue to face material shortages and a tight construction labor market. This translates into a 50% increase in the number of single-family dwellings authorized but not started compared to a year ago. In addition, only 25% of new homes sold in July were fully built. In comparison, 40% of new homes sold in spring 2020 were completely finished.

Home builders across the country are finding ways to defy expectations, keep their pipelines moving, and build more homes,” Zillow Economist Matthew Speakman said in a statement. “All is not perfect and the manufacturers are showing a certain creativity to get things done. These choppy waters are unlikely to subside anytime soon, but builders continue to find ways to stay afloat. “

A closer look at the data reveals that strong production of multi-family dwellings was the main driver of the increase in the total number of housing starts. Although the number of withdrawn single-family home building permits was 0.6% above the revised July rate, the number of single-family housing starts fell 2.8% from July. In comparison, multi-family permits and multi-family housing starts rose 15.8% and 20.6%, respectively, from July to August.

Despite this, the National Association of Home BuildersRobert Dietz, chief economist of (NAHB), is optimistic about the trajectory of the single-family home market.

“More inventory is coming for a market that continues to face a housing deficit,” Dietz said in a statement. “The number of single-family homes under construction in August – 702,000 – is the highest since the Great Recession and is 32.7% higher than a year ago.”

Regionally, combined single-family and multi-family housing starts are on the rise across the country, with the Northeast region registering the largest increase (35.9%) since the start of the year (January to August) compared to the same period in 2020.

This report follows the September NAHB publication and Wells Fargo Housing Market Index (HMI), which revealed that homebuilder sentiment rose for the first time in three months.

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