Implications: Following a temporary snag in August, housing starts regained forward momentum in September, as single-family construction rose for the fifth month in a row, hitting the highest level since 2007. Recent reports continue to illustrate the ongoing divergence between single-family and multi-unit construction, as the pandemic continues to shift buyer preferences away from dense cities and towards the more spacious suburbs. Single-family construction has now made a full V-shaped recovery and sits 7.2% above its February pre-pandemic high. Meanwhile, new multi-unit construction is down 42.4% over that same period. The ongoing rebound in single-family construction is doubly important because that sector has been the lone driver in the upward trend in overall starts since 2015 when the multi-unit sector plateaued, so continued gains remain crucial for the housing market going forward. The recent rebound in starts is even more impressive considering that builders are dealing with multiple headwinds to construction. While home builders have been classified as "essential workers" in most areas of the country, regulations still require fewer people per crew, dragging out project times. The construction industry also seems to be suffering from an ongoing shortage of workers, with job openings hovering near pre-pandemic levels while job openings in the broader economy are still down significantly. In other words, there are still lots of unfilled construction jobs that, if filled, would promote a sharper rebound in new construction. Finally, supply chains have been disrupted and are struggling to keep up with the pace of new construction. Looking to the future, overall permits rose 5.3% in September, and just like with starts, this was entirely due to an increase in single-family permits which rose 7.8%. That marks the fifth consecutive gain for single-family permits, which are now 12.6% above the February pre-pandemic high. A continued rebound in construction is likely in the months ahead if the NAHB Index, a gauge of homebuilder sentiment, is anything to go by. That measure was released yesterday and rose to 85 in October, the highest reading on record going back to the mid-1980s.
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