Housing Figures: Builders More Confident Despite Ongoing Challenges
September 28, 2021
Housing Figures is our monthly round-up of the top news stories related to residential new construction spending and the latest market numbers.
This month we compare new home sales (up) to existing sales (down) and look more closely at the latest housing starts (also up, thanks to multifamily) and why builders are feeling slightly more confident. We also pulled several articles that examine the current challenges for home builders from material delays to labor shortages.
Home sales: new up, existing down
Sales of new homes edged higher in August. Sales of newly built single-family homes rose 1.5% in August to a seasonally adjusted annual rate of 740,000 units. The increase is thanks to strong demand, low interest rates and fewer existing homes available for sale. New home sales increased 2.4% on a year-to-year basis. Inventory is at a level of 6.1 months’ supply, representing 378,000 new single-family homes for sale. The median sales price was $390,900. [NAHB Now]
Meanwhile, existing home sales declined in August. After two months of gains, the National Association of Realtors reported that existing home sales decreased 2% in August to a seasonally adjusted annual rate of 5.88 million. That represents a 1.5% dip from 2020. Single-family home sales decreased to an adjusted rate of 5.19 million, which is down 1.9% from July and 2.8% from this time last year. Sales slipped as prices rose, and as potential buyers wait for more inventory, Lawrence Yun, NAR’s chief economist, said. [HBS Dealer]
Housing starts increase for multifamily
New home starts are up 3.9% thanks to a strong multifamily showing. Overall housing starts increased 3.9% in August to a seasonally adjusted annual rate of 1.62 million units — up 17.4% from 2020. Single-family starts actually decreased by 2.8%, but multifamily starts increased to a rate of 530,000 units. Building permits were also up 6% to an adjusted annual rate of 1.728 million units. Meanwhile, single-family home completions were up 2.8% from July thanks to activity in the South and the Northeast. [Realtor.com]
Reversal in single-family, multifamily units under construction. An Eye On Housing analysis found that as of July 2021, there are roughly the same amount of units under construction in both the single-family and multifamily markets. This is a reversal from a consistent trend of more multifamily units (or residences with 2+ units in each property) under construction since early 2013 and is a result of increased demand for single-family homes. [Eye On Housing]
Shortages and delays continue
Most multifamily developers are experiencing construction delays. The eighth edition of the National Multifamily Housing Council Survey found that construction delays are being experienced by 93% of multifamily developers. Of those experiencing delays, 83% reported delays in both starts and permits, an increase from 80% from the seventh survey. All respondents reported materials price increases, with the average developer reporting a 13% price increase over the three most recent months. [MHN]
Lennar discusses the home building traffic jam. Lennar's CEO discussed current home building challenges, including how the entire industry is facing labor constraints and shortages. CEO Jon Jaffe said they’re particularly seeing shortages with engineered wood, windows, garage doors, paint and vinyl siding. The home builder expects shortages will continue into the fourth quarter and into 2022. A lack of skilled labor and building lots continue to hold the market back, NAHB’s chief economist, Robert Dietz, said. [Construction Dive]
Arlington Properties also talks delays and changes made following COVID. An executive with multifamily developer Arlington Properties spoke with MHN on how the company is handling construction challenges. For starters, David Ellis, executive vice president of development, said their construction division is starting to procure materials much earlier, while storing materials when possible. He also said the Florida markets seem to be most in demand right now and that they’re still seeking primarily suburban locations. [MHN]
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Builder confidence increases
Home builders are feeling more confident in September. Builder confidence, according to the latest NAHB/Wells Fargo Housing Market Index, inched up to 76 in September from 75 in August. Confidence increased despite material and labor challenges, largely in part to lower lumber prices and strong housing demand. Though home builder sentiment has decreased over the past several months, a reading over 50 indicates that builders feel more positively than negatively about the current conditions. Regionally, the Northeast fell two points to 72, the South fell two points to 80 and the West also fell two points to 83. The Midwest remained at 68. [Eye On Housing]
Housing market is still red hot
The housing market is merely red hot now. As Zillow noted, the housing market has eased from white hot to merely red hot with home value appreciation slowing for the first time since January. Meanwhile, inventory rose for the fourth month in a row, helping to ease competition (and bidding wars). Zillow also found that rent growth slowed, though rents are still higher than they were this time last year. [Zillow]
Builders report stabilizing trends
Nearly half of home builders reported year-over-year sales increases. The latest State of the Industry report, compiled with BTIG, showed that new home sales and traffic appeared to be stabilizing in August. In the survey, 49% of respondents reported year-over-year sales increases compared to only 38% for July. Meanwhile, traffic indicators also stabilized instead of dropping for the first time in three months. For the second straight month, builders continued to report taking a more cautious approach to price increases. [HomeSphere]