New-Home Construction Charges On, as Builders Shift Focus to Multifamily Projects
New-Home Construction Charges On, as Builders Shift Focus to Multifamily Projects.
Americans may be relocating to the suburbs, but builders are betting that people will still be interested in living in apartments and condos.
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The numbers: U.S. home builders started construction on homes at a seasonally-adjusted annual rate of 1.55 million in November, representing a 1.2% increase from the previous month’s figure, the U.S. Census Bureau reported Thursday. Compared with last year, housing starts were up nearly 13%. The pace of building permits was the highest in 14 years.
Permitting for new homes occurred at a seasonally-adjusted annual rate of 1.64 million, up 6.2% from October and 8.5% from a year ago.
Economists polled by MarketWatch had expected housing starts to occur at a pace of 1.54 million and building permits to come in at a pace of 1.57 million.
What happened: A surge in the multifamily sector — which includes apartment buildings and condos — drove the increase in both housing starts and building permits. Multifamily starts were up 8%, versus 0.4% for single-family homes. And the number of permits issued for buildings with five or more units rose nearly 23% between October and November, compared with a 1.3% uptick for single-family structures.
New-home construction activity didn’t grow evenly across all parts of the country. Housing starts surged roughly 59% in the Northeast, driven by the multifamily boom, but fell nearly 5% in the Midwest and 6% in the South. The Midwest and South both experience slowdowns in new construction of single-family homes.
The big picture: America’s building boom is continuing for now — and that’s good news for prospective home buyers. The severe shortage of existing homes for sale has pushed prices higher. As a result, the new-home segment of the market holds renewed importance.
“New home construction stands out as a clear solution to the rising challenge of affordability especially as housing demand is expected to continue to grow,” said Realtor.com senior economists George Ratiu. “However, without a significant supply of new construction, many would-be buyers will be forced to sit on the sideline due to record-high home prices.”
But Ratiu signaled one concern for the market: The pace at which builders completed their projects slowed in November. The number of completions fell nearly 1% for single-family homes and 35% for multifamily buildings. “The momentum for single-family starts and completions is slowing,” Ratiu said.
What they’re saying: “Single-family housing continues to be well-supported by strong demand and low mortgages rates,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, wrote in a research note.
“Builders are hyper-optimistic,” Joel Naroff, president and chief economist at Naroff Economics, wrote in a research note. “Whether that is irrational or not, well we shall see.”
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