Home Building Regains Momentum as Building Permits Fall to Eight-Month Low
After May's revised results, June's new-home and apartment construction exceeded expectations. Single family growth was concentrated in the Northeast and South.
Data From: US Department of Commerce; graph: June saw housing starts rise 6.3% to 1.643million units annually. Single-family and multifamily starts are solidly rising. The data for May was slightly revised lower. The net result was stronger than expected and both new home construction, as well as apartment development, seem to be gaining momentum that was lost earlier in spring.
Single-family starts increased 6.3% to 1.160 million units, which was the second highest this year. The South saw the largest increase in June, with single-family starts increasing 13.7% to a pace of 672,000 units per year. The South accounts for nearly half of all single-family homes in the United States. data: US Department of Commerce; graph by ForConstructionPros.com
The Northeast saw single-family starts rise sharply, which is the region with the lowest percentage of single-family construction. Single-family starts in the Northeast increased 34.4% to 82,000 units annually in June. Single-family starts remained the same in the West, while they fell by 19.9% in the Midwest.
However, housing permits fell 5.1% in June, their third consecutive decline - and their lowest point since October. Single-family permits declined 6.3%, while multifamily permits declined 2.6%.
Mark Vitner, Senior Economist at Wells Fargo Securities, says that permits are less volatile than starts and have been running significantly higher than starts over the past year. "June's fall brings permits back in line to starts."
There is still a large backlog of housing units that were approved but have not been started.
Vitner claims that the permits pullback bears looking but actually brings single-family permits back in line with 563,500 starts. Single-family permits have totaled 588 800 units through six months of 2021. At the end of June, 144,000 single-family homes were authorized and not yet begun.
According to new home sales data, the rise in housing units that have been authorized but not yet begun is consistent with a steady rise in sales of homes where construction has not yet begun. The builders have managed to get around supply chain bottlenecks and limited sales in new communities. Sales caps will be lifted once supply chain bottlenecks are less severe. Both sales and housing starts will improve.
These latest data are consistent with Wells Fargo’s prediction of 1.60 million housing starts in the coming year.
Vitner says, "Those who believe that permits' recent slide is a sign of something worse for housing are not seeing how many permits have increased more than starts." The total number of permits issued in the first six months this year is 865,500 units. This is 10% more than starts. For the past year permits have been ahead of starts, which has resulted in a steady rise in the number homes approved but not yet built. The backlog has increased by 43.3% in the last year, most of it coming from single-family homes.data: US Department of Commerce; graph: ForConstructionPros.com
June saw housing starts rise 6.3% to 1.643million units annually. Single-family and multifamily starts are solidly rising. The data for May was slightly revised lower. The net result was stronger than expected and both new home construction as well as apartment development seem to be gaining momentum that was lost earlier in spring.
Single-family starts increased 6.3% to 1.160 million units, which was the second highest this year. The South saw the largest increase in June, with single-family starts increasing 13.7% to a pace of 672,000 units per year. The South accounts for nearly half of all single-family homes in the United States. data: US Department of Commerce; graph by ForConstructionPros.com
The Northeast saw single-family starts rise sharply, which is the region with the lowest percentage of single-family construction. Single-family starts in the Northeast increased 34.4% to 82,000 units annually in June. Single-family starts remained the same in the West, while they fell by 19.9% in the Midwest.
However, housing permits fell 5.1% in June, their third consecutive decline - and their lowest point since October. Single-family permits declined 6.3%, while multifamily permits declined 2.6%.
Mark Vitner, Senior Economist at Wells Fargo Securities, says that permits are less volatile than starts and have been running significantly higher than starts over the past year. "June's fall brings permits back in line to starts."
There is still a large backlog of housing units that were approved but have not been started.
Vitner claims that the permits pullback bears looking but actually brings single-family permits back in line with 563,500 starts. Single-family permits have totaled 588 800 units through six months of 2021. At the end of June, 144,000 single-family homes were authorized and not yet begun.
According to new home sales data, the rise in housing units that have been authorized but not yet begun is consistent with a steady rise in sales of homes where construction has not yet begun. The builders have managed to get around supply chain bottlenecks and limited sales in new communities.
Sales caps will be lifted once supply chain bottlenecks are less severe. Both sales and housing starts will improve.
These latest data are consistent with Wells Fargo’s prediction of 1.60 million housing starts in the coming year.
Vitner says, "Those who believe that permits' recent slide is a sign of something worse for housing are not seeing how many permits have increased more than starts." The total number of permits issued in the first six months this year is 865,500 units. This is 10% more than starts. For the past year permits have been ahead of starts, which has resulted in a steady rise in the number homes approved but not yet built. The backlog has increased by 43.3% in the last year, most of it coming from single-family homes.
