By Nathalie Voit
New home building projects have taken a hit as builders grapple with higher costs and material shortages. According to data released by the Commerce Department on Nov. 17, privately-owned housing starts decreased 0.7% in October to a seasonally adjusted annual rate of 1.52 million.
Higher costs associated with supply chain disruptions in the construction industry have prompted many builders to delay projects, despite strong buyer demand in the market for new housing.
According to the October 2021 New Residential Construction Report, U.S. single-family homebuilding in October fell 3.9% to a rate of 1,039,000, well below September’s revised rate of 1,081,000. Multifamily starts, or starts for buildings containing five or more housing units, were up 6.8% to 470,000. Overall, housing starts fell 0.7% last month to 1,520,000. The numbers are below Refinitiv analyst expectations, who predicted a rate of 1.576 million starts in October.
While preparations for new housing projects have unexpectedly taken a backseat, the number of homes authorized for construction in the near future soared to a 15-year high, Reuters reported. Last month, new building permits rose 4% to a seasonally adjusted rate of 1,650,000 as the demand for new housing surged amid widespread shortages that have put current projects on hold.
According to the Commerce report, single-family building permit authorizations in October rose 2.7% to a rate of 1,069,000, well above September’s revised figure of 1,041,000. Building permits for multifamily units topped 528,000 last month.
“The solid market for home building continued in November despite ongoing supply-side challenges,” said National Association of Homebuilders (NAHB) Chairman Chuck Fowke in a report released Tuesday. “Lack of resale inventory combined with strong consumer demand continues to boost single-family home building.”
According to the NAHB/Wells Fargo Housing Market Index (HMI), builder sentiment in the market for single-family housing jumped three points to 83/100 in November. Builder confidence is up for the third consecutive month, explained the organization in its report.
“In addition to well-publicized concerns over building materials and the national supply chain, labor and building lot access are key constraints for housing supply,” said NAHB Chief Economist Robert Dietz. “Lot availability is at multi-decade lows, and the construction industry currently has more than 330,000 open positions. Policymakers need to focus on resolving these issues to help builders produce more housing to meet strong market demand.”