Drop in single-family home construction in the United States; construction backlog is skyrocketing

Construction of residential single-family homes by KB Home is shown under construction in the community of Valley Center, California, United States, June 3, 2021. REUTERS / Mike Blake

  • Housing starts drop 0.7% in October
  • Starts of single-family homes are down 3.9%; multi-family up 6.8%
  • Building permits increase by 4.0%; single-family 2.7% gain

WASHINGTON, Nov. 17 (Reuters) – Construction of single-family homes in the United States fell in October as the number of homes allowed to build but not yet started hit a 15-year high, underscoring the disruption in the housing market due to to a continuing shortage of materials and labor.

Although Wednesday’s Commerce Department report showed an increase in permits for future housing construction, the rise was concentrated in the volatile multi-family housing segment. It won’t do much to alleviate an acute shortage of homes on the market, which has led to record annual home price gains.

“Residential housing construction activity continues to flounder; no one has figured out how to produce more housing for Americans where housing shortages and inflation persist,” said Christopher Rupkey, chief economist at FWDBONDS in New York.

Single-family housing starts, which account for the largest share of the housing market, fell 3.9%, a seasonally adjusted annual rate of 1.039 million units last month. Housing starts fell in all four regions.

Residential construction has essentially stalled this year as builders battle shortages and rising commodity prices. A survey by the National Association of Home Builders on Tuesday showed that confidence among builders of single-family homes rose for the third consecutive month in November, but noted that “challenges on the supply side, especially bottlenecks in ‘strangulation of building materials and shortages of lots and labor, remain stubbornly persistent. “

Lumber, which is used for framing, remains expensive and the prices of copper, another essential material in residential construction, are high. In addition, there were approximately 333,000 job vacancies in the construction industry at the end of September.

Material compression could ease during the winter, a generally slow season for homebuilding in the Northeast and Midwest.

Starts of buildings with five or more units rose 6.8% to 470,000 units last month. With the decline in single-family home construction, overall housing starts fell 0.7% to 1.520 million units in October.

Economists polled by Reuters were forecasting a rebound in housing starts to a rate of 1.576 million units.

Housing starts fell from the pace of 1.725 million units recorded in March, which was more than a 14-and-a-half-year high.

Yet housing construction remains supported by a severe shortage of second-hand housing in the market, which has resulted in record increases in house prices.

The backlog of single-family homes approved for construction but not yet started jumped 4.8% to 152,000 last month, the highest since August 2006.

Permits for future housing construction rose 4.0% to a rate of 1.650 million units in October. Single-family home permits rose 2.7% to a rate of 1.069 million units, leaving them just above housing starts.

Permits for buildings with five or more units jumped 6.5% to 528,000 units. Workers returning to offices and schools reopening for in-person learning, thanks to COVID-19 vaccinations, are fueling demand for rental apartments.

Completed homes remained unchanged at a rate of 1.242 million units. Single-family home completions fell 1.7% to 929,000 units.

The stock of single-family dwellings under construction rose 1.4% to 726,000 units last month.

Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci

Our Standards: Thomson Reuters Trust Principles.

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