Chart: Housing Starts Dip in February; Still Above 2020
Originally published by: NAHB — March 17, 2021
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Housing production continue to slow in February off strong levels as rising lumber and other material prices continue to affect the housing industry. Overall housing starts decreased 10.3% percent to a seasonally adjusted annual rate of 1.42 million units, according to data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
The February reading of 1.42 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts decreased 8.5 percent to a 1.04 million seasonally adjusted annual rate. The multifamily sector, which includes apartment buildings and condos, decreased 15 percent to a 381,000 pace, settling back closer NAHB’s forecast level for the year after a strong January reading.
Despite ongoing solid homebuyer traffic, the declining trend for home building at the start of 2021 is consistent with recent softening of the NAHB/Wells Fargo Housing Market Index (HMI). Builders report concerns over increasing lumber and other construction costs, as well as delays in obtaining building materials. Rising interest rates will also erode housing affordability in 2021, as seen by recent gains in the 10-year Treasury rate. Builders also reporting growing concerns about a more challenging regulatory environment that could limit land development volume. The NAHB forecast includes some weakening for single-family home building at the start of 2021 (off recent highs), with a return to the long-run post-Great Recession trend as the year progresses.
It is also worth noting that the number of single-family homes permitted but not started construction continued to increase in February, rising to 121,000 units. This is 36 percent higher than a year ago, as building material cost increases and delays slow some home building.
The February winter storm Uri also held down home building in Texas and some neighboring states. It is worth keeping in mind that about 16% of single-family home construction occurs in Texas alone. This effect will be more measurable in the March data, in terms of a possible rebound.
As an indicator of the economic impact of housing, there are now 621,000 single-family homes under construction. This is 16 percent higher than a year ago. There are currently 662,000 apartments under construction, off a post-Great Recession high mark set in August 2020 (683,000).
On a regional basis compared to the previous month, combined single-family and multifamily starts are 39.5 percent lower in the Northeast, 34.9 percent lower in the Midwest, 9.7 percent lower in the South and 17.6 percent higher in the West.
Overall permits decreased 10.8 percent to a 1.68 million unit annualized rate in February. Single-family permits decreased 10.0 percent to a 1.14 million unit rate. Multifamily permits decreased 12.5 percent to a 539,000 pace. Looking at regional permit data compared to the previous month, permits are 9.8 percent lower in the Northeast, 1.2 percent higher in the Midwest, 13.9 percent lower in the South and 11.3 percent lower in the West.