Nov housing starts report is an indication of strength for the housing market. The # of permits issued, which can signal how much construction is in the pipeline, increased by 3.6%, homebuilding rose as total housing starts increased 11.8% M/M (SF up 11.3%).
This month saw an increase of 4% in the number of completed homes, which is additional new net supply added to the housing stock. The growth in completions means more homes on the market in the short-term, offering some immediate relief in alleviating housing supply shortages.
Builders are ending the year feeling confident, with the homebuilder sentiment index increasing for the 4th straight month in December – up one point to 84. Of the index’s three components, both current sales conditions & the traffic of prospective buyers rose 1 point.
Demand for new homes continues to be propelled by demographically-driven demand for homes against a backdrop of historically tight existing-home inventory. The lack of existing homes for sale is supportive of new construction.
On the supply side, builders continue to face a shortage of skilled labor, materials & lots, all headwinds to increasing the pace of new home construction. The # of SF homes permitted but not started declined this month but remains elevated- has ~ 41% higher than one year ago.
And lumber prices are on the rise again due to a combination of supply chain disruptions and labor shortages at sawmills. Another spike in prices may further delay new home completions and negatively impact affordability.
Another headwind to building more homes: demand for construction workers is high but hiring remains difficult. The ratio of construction job openings to hires in Oct dipped to near record lows & remains below pre-pandemic levels, implying it is more difficult to hire now.
Bottom line: we need more homes & it will take time to reduce the housing stock “debt” in the face of growing demand. But today's report in combination with a positive builder's report sends an optimistic message about the housing market as we enter 2022.
Share this Scrolly Tale with your friends.
A Scrolly Tale is a new way to read Twitter threads with a more visually immersive experience.
Discover more beautiful Scrolly Tales like this.