November Housing Starts Rise for 3rd Straight Month
November housing starts rose for the third straight month, boosted by builder confidence and strong consumer demand, HUD and the Census Bureau reported yesterday.
The report said privately owned housing starts in November rose to a seasonally adjusted annual rate of 1,547,000, 1.2 percent higher than the revised October estimate of 1,528,000 and 12.8 percent higher than a year ago (1,371,000). Single-family housing starts in November rose to 1,186,000, 0.4 percent higher than the revised October figure of 1,181,000. The November rate for units in buildings with five units or more rose to 352,000, 8 percent higher than October but 16 percent lower than a year ago.
Regionally results were mixed, with growth in the Northeast and West offsetting declines in the South and Midwest. In the Northeast, starts jumped by nearly 59 percent to 135,000 units, seasonally annually adjusted, from 85,000 units in October; from a year ago, starts in the Northeast improved by 27.4 percent. In the West, starts posted an 8.3 percent gain to 407,000 units in November from 376,000 units in October and improved by 15.3 percent from a year ago.
In the South, starts fell by 6 percent in November, seasonally annually adjusted, to 809,000 units from 861,000 units in October but improved by 9 percent from a year ago. In the Midwest, starts fell by nearly 5 percent to 196,000 units in November from 206,000 units in October but improved by 15.3 percent from a year ago.
“The annual pace of new housing starts remained strong in November, helping to bring more inventory to the housing market to try to keep up with robust demand,” said Joel Kan, Associate Vice President of Economic and Industry Forecasting with the Mortgage Bankers Association. “Single-family construction slightly climbed to the highest level since 2007 and was 29 percent higher than a year ago – the fifth month of double-digit annual growth. Multifamily starts increased more substantially at 4 percent last month.”
Kan said the report is consistent with other housing data that show the housing market has rebounded “substantially” from the second quarter. “Driven by increased demand for more indoor and outdoor space, the second half of the year continues to see more construction, home sales and mortgage originations,” he said. “Additionally, permits for new single-family construction also rose to 2007 highs, potentially an indication that we might see the increase in homebuilding continue into early 2021.“
Odeta Kushi, Deputy Chief Economist with First American Financial Corp., Santa Ana, Calif., said new home construction momentum may set stage for the “year of the home builder.”
“The continued rise in housing starts signals the single-family sector will lead the way for new-home construction,” Kushi said. “2021 may be the year of the home builder as a massive housing shortage, coupled with demographic and behavioral trends favoring single-family homes, sets the stage for builders to ramp up construction.”
Kushi noted fundamentals driving new-home sales are strong – low mortgage rates, a limited supply of existing homes for sale and sturdy demand driven by millennials who are aging into home-buying. “While builders continue to push to meet demand, supply-side headwinds will remain in 2021,” she said. “Residential construction employment is still not back to pre-pandemic levels, and construction material costs remain high. These headwinds could slow the home-building momentum at a time when the housing market desperately needs more supply.”
Mark Vitner, Senior Economist with Wells Fargo Securities, Charlotte, N.C., said the housing market “continues to do its part” in the struggling economy.
The recent ramp up in single-family starts was expected to take a breather in November amidst reports of growing material shortages and higher lumber prices,” Vitner said. “Those factors may impact starts in coming months, but in November builders appear to have taken advantage of unseasonably mild weather to move forward with more construction projects than they normally would in late fall.”
Vitner said demand for single-family homes remains “incredibly strong.” “The COVID
pandemic has triggered an out-migration from many large, high-priced, globally connected urban areas to neighboring suburbs and exurbs, as well as mid-sized cities and vacation destinations in the South and West,” he said. “The result has been a massive shift from apartments to single-family homes.”
Vitner noted even if single-family starts pull back in coming months, there is a good chance overall starts will remain close to their current levels. “Demand for apartments has been surprisingly strong in recent months, with most of the gains coming in the suburb,” he said.
Doug Duncan, Chief Economist with Fannie Mae, Washington, D.C., said while housing construction has helped drive the economic recovery to date, the rapid rebound phase has likely passed.
“The pace of starts has been bolstered in recent months due to fewer homes being in the later stages of construction, a result of the disruptions from the spring,” Duncan said. “Therefore, homebuilders have increased their starts pace to catch up to strong homebuyer demand, and more homebuilder resources have been focused on the early stages of construction. However, this process is likely near its end as it takes on average about seven months to construct a new home.”
The report said privately owned housing units authorized by building permits in November rose to a seasonally adjusted annual rate of 1,639,000, 6.2 percent higher than the revised October rate of 1,544,000 and 8.5 percent higher than a year ago (1,510,000). Single-family authorizations in November rose to a rate of 1,143,000, 1.3 percent higher than the revised October figure of 1,128,000. Authorizations of units in buildings with five units or more rose to a rate of 441,000 in November, nearly 23 percent higher than October and 17.4 percent higher than a year ago.
The report said privately owned housing completions in November fell to a seasonally adjusted annual rate of 1,163,000, 12.1 percent below the revised October estimate of 1,323,000 and 4.8 percent below the November 2019 rate of 1,222,000. Single-family housing completions in November fell to 874,000; 0.6 percent below the revised October rate of 879,000. The November rate for units in buildings with five units or more was 280,000, nearly 35 percent lower than October and nearly 6 percent lower than a year ago.