Home Logon FTA Investment Managers Blog Subscribe About Us Contact Us

Search by Ticker, Keyword or CUSIP       

Blog Home
   Brian Wesbury
Chief Economist
X •  LinkedIn
   Bob Stein
Deputy Chief Economist
X •  LinkedIn
  Housing Starts Declined 0.7% in October
Posted Under: Data Watch • Home Starts • Housing • Inflation • COVID-19
Supporting Image for Blog Post

Implications:  Since emerging from the initial collapse in construction activity early in the pandemic, housing starts have averaged a 1.550 million annual rate, and starts in October remained roughly at that average, although 0.7% lower than in September.  Builders continue to deal with ongoing issues surrounding supply chains and shortages of labor that are holding back a broader upswing in activity. Looking at the details, all of the decline in October came from the single-family sector, where activity fell 3.9%.  Meanwhile, multi-family construction rose 7.1%.  Notably, in the past year multi-family starts are up 36.6% while single-family starts have fallen 10.6%.  It looks like developers may be shifting some resources away from single-family home construction and toward larger apartment buildings in response to rapidly rising rents as some people move back into big cities and the eviction moratorium ends.  Zillow estimates that rental costs for new tenants are up 9.2% in the past year and Apartmentlist.com estimates they have risen an even faster 15.8%, easily exceeding typical gains in the 3.0 – 4.0% range.  Recent distributional effects aside, housing construction remains healthy.  Looking at the 12-month moving average of overall housing starts to help sift through recent volatility shows residential construction now stands at the fastest pace since 2007.  While the monthly pace of activity will ebb and flow as the recovery continues, we expect housing starts to trend upward in the next couple of years.  Builders have a huge number of permitted projects sitting in the pipeline waiting to be started.  In fact, the backlog of projects that have been authorized but not yet started is currently the highest since the series began back in 1999.  Meanwhile, permits for new building projects rose 4.0% in October, demonstrating that builders see even more demand on the horizon.  Keep in mind, the US needs roughly 1.5 million housing starts per year based on population growth and scrappage (voluntary knockdowns, natural disasters, etc.).  However, we haven't built that many new homes in any calendar year since 2006.  With plenty of future building activity in the pipeline, builders looking to boost the inventory of homes and meet consumer demand, and as more Millennials finally enter the housing market, it looks very likely construction in 2021 will cross the 1.5 million unit benchmark this year and then move higher in 2022. In other recent housing news, the NAHB Housing Index, which measures homebuilder sentiment, increased to 83 in November from 80 in October, hitting a six-month high.   

Click here for a PDF version
Posted on Wednesday, November 17, 2021 @ 11:29 AM • Post Link Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
Follow First Trust:  
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2024 All rights reserved.