Builders are trying to catch up to demand. Calculated Risk’s Bill McBride per the US Census Bureau reports the largest number of homes under construction since 1973.
Privately‐owned housing starts in December were at a seasonally adjusted annual rate of 1,702,000. This is 1.4 percent above the revised November estimate of 1,678,000 and is 2.5 percent (±13.8 percent) above the December 2020 rate of 1,661,000. Single‐family housing starts in December were at a rate of 1,172,000; this is 2.3 percent below the revised November figure of 1,199,000. The December rate for units in buildings with five units or more was 524,000.
The Census Bureau also said that currently there are 750 thousand multi-family units under construction. This is the highest level since July 1974! For multi-family, construction delays are probably also a factor. The completion of these units should help with rent pressure, with rents rising more than 7 percent annually.
Why so much residential construction? Existing-home sales continued to use up available inventory, surging to 6.5 million annualized units in January. Since we are in mid-winter when sales are usually at a low point, why the surge?
"Buyers were likely anticipating further rate increases and locking-in at the low rates, and investors added to overall demand with all-cash offers," said Lawrence Yun, NAR's chief economist. "Consequently, housing prices continue to move solidly higher."
Total existing-home sales,1 https://www.nar.realtor/existing-home-sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, climbed 6.7% from December to a seasonally adjusted annual rate of 6.50 million in January. Year-over-year, sales fell 2.3% (6.65 million in January 2021), said the Realtors.
The inventory of homes for sale has dropped to just 1.6 months at the current torrid sales rate. This is squeezing out homebuyers that can afford homes below $500,000, said Yun.
"There are more listings at the upper end – homes priced above $500,000 – compared to a year ago, which should lead to less hurried decisions by some buyers," Yun added. "Clearly, more supply is needed at the lower-end of the market in order to achieve more equitable distribution of housing wealth."
This has pushed housing prices even higher. The S&P CoreLogic Case-Shiller 20-city price index posted a 18.6 percent year-over-year gain in December, up slightly from 18.3 percent the previous month.
It tells us in spite of labor and building material shortages, builders are finding ways to start new construction in the face of red hot demand. There are plenty of potential home buyers out there with the record surge in job creation over the past year.
Harlan Green © 2021
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
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