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  • Writer's pictureTom Reilly

Builders Rush to Produce More Homes!

January 22, 2021

Homebuilders started on more homes at the end of the year, up by double-digit margins and the highest construction numbers since September 2006. But rising lumber prices and increasing regulatory costs pose risks to future production, the National Association of Home Builders notes.

Overall housing starts, reflecting single-family and multifamily construction, rose 5.8% in December 2020 to a seasonally adjusted annual rate of 1.67 million units, the U.S. Department of Housing and Urban Development and U.S. Census Bureau reported Thursday. Broken out, single-family starts rose 12% to a seasonally adjusted annual rate of 1.34 million units. The multifamily sector, which includes apartment buildings and condos, fell 13.6% to a pace of 331,000 units.

Single-family housing starts for all of 2020 totaled 991,000, up 11.7% compared to the previous year.

“The worst of the housing shortage could soon come to an end,” says Lawrence Yun, chief economist of the National Association of REALTORS®. “More inventory is clearly needed to lessen the heat of multiple offers and the consequent frustration of multiple losing bids.”

For the past 13 years, homebuilders have been underproducing homes at rates below historic norms, Yun says. “Therefore, it will take robust home construction this year and next, at a minimum, to fully supply the market to properly meet the demand,” Yun says. “More construction also means more local job creation. The housing sector looks to lead the economy in recovery in 2021.”

Still, builders are concerned about whether they will be able to meet demand in 2021. “Builder concerns about a changing regulatory landscape have triggered many to move up their plans to pull permits and put shovels to the ground,” said Chuck Fowke, chairman of the National Association of Home Builders. “Our latest builder sentiment survey suggests somewhat softer numbers ahead due to rising building costs and an uncertain regulatory climate.” Read more: Uptick in Costs, COVID-19 Cases Shakes Builder Confidence

The builder association is still forecasting for production increases in 2021, but the gains could be tempered by ongoing supply-side challenges related to material costs and delivery times, a decrease in buildable lots, and regional labor shortages that are “exacerbating affordability woes,” said Robert Dietz, NAHB’s chief economist.

Regionally, single-family and multifamily starts on a year-to-date basis (January through December 2020 compared to a year earlier) are highest in the Midwest, up 13.2%, followed by the South (7.5%), the West (6.2%), and the Northeast (2.8%).

Source: “Instant Reaction: Housing Starts, January 21, 2021,” National Association of REALTORS® and “Housing Starts End 2020 Strong; Risks Ahead,” National Association of Home Builders (Jan. 21, 2021)

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