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Writer's pictureTom Reilly

Builders Struggle to Catch Up to Surging Demand!



December 18, 2020

More consumers are being drawn to new-home construction and homebuilders are rapidly filling orders. But they’re struggling to keep pace as challenges within the industry mount.


Single-family starts flattened in November as builders struggled to meet demand, the U.S. Census Bureau reported this week. Overall housing starts rose 1.2% to a seasonally adjusted annual rate of 1.55 million—nearly a 13% jump over a year ago. The pace of building permits is also at its highest level in 14 years.


“Though single-family construction continued to be strong in November, builders are unable to keep up with demand due to rising regulatory and construction costs and shortages of lots and labor,” said Chuck Fowke, chairman of the National Association of Home Builders. “The incoming Biden administration needs to focus on policies to improve housing affordability and to increase supply to help housing continue to lead the economy forward.”


Single-family construction has been a “true bright spot amid economic challenges in 2020,” said Robert Dietz, chief economist of the NAHB. Single-family starts are 10% higher than a year ago and have posted their best year since the Great Recession.


“However, the backlog continues to grow, with the number of single-family homes permitted but not started construction up 16.3% from November 2019 to November 2020 as material delays and higher costs hold back building,” Dietz added.


Combined single-family and multifamily starts have been highest in the Midwest, up 14.4% from January through November when compared to a year ago. The South has seen starts increase by 7.6% in that time period, followed by a 5.4% uptick in the West. The Northeast has seen the only decrease in that time—3.3% lower.


Permits—a sign of future homebuilding activity—rose 6.2% in November, but a bulk of that was from an increase in multifamily permits, which reflect apartment building and condo construction. Permits are highest on a year-to-date basis in the South (up 6.9%), followed by the Midwest (up 5.7%), and the West (0.7%). Permits dropped 4.4% in the Northeast.


Source: National Association of Home Builders

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