Home   Logon   Mobile Site   Research and Commentary   About Us   Call 1.800.621.1675 or Email Us       Follow Us: 

Search by Ticker, Keyword or CUSIP       
 
 

Blog Home
   Brian Wesbury
Chief Economist
 
Click for Bio
Follow Brian on Twitter Follow Brian on LinkedIn View Videos on YouTube
   Bob Stein
Deputy Chief Economist
Click for Bio
Follow Bob on Twitter Follow Bob on LinkedIn View Videos on YouTube
 
  Housing Starts Increased 3.9% in August
Posted Under: Data Watch • Home Starts • Housing • Inflation • COVID-19

 
Implications: Housing starts surprised to the upside in August, but the details in the report were not quite as strong.  All of the gain in August was due to the volatile multi-family sector, where new construction rose 20.6%.  Meanwhile, construction of single-family homes fell 2.8%, the second decline in a row.  While it's too early to know for sure, there are signs developers may be shifting 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 are up 7.4% in the past year and Apartmentlist.com estimates they have risen an even faster 12.0%, easily exceeding typical gains in the 3-4% range.  Notably, starts in the Northeast, which is home to many large cities, rose 167.2% in August, the largest monthly gain on record since 1959, primarily driven by the multi-family sector.  Home building has been volatile so far in 2021 due to widespread supply-chain issues and shortages of labor, but looking at the 12-month moving average, which helps sift through that 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 remain in an upward trend.  A big reason for our confidence is that 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.  Despite this, builders increased permits for new construction for the second month in a row, signaling an expectation that demand will remain strong in the future.  Moreover, all the gain in permits came from the multi-family sector, as well, which rose 15.8% in August and now sits at the highest levels since 1990.  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 and builders looking to boost the inventory of homes and meet consumer demand, as more Millennials finally enter the housing market, it looks likely construction in 2021 will cross the 1.5 million unit benchmark this year and then move higher in 2022.  This positive outlook is reinforced by yesterday's NAHB index, a gauge of homebuilder sentiment, which rose to 76 in August from 75 in July.  This marks the first gain in five months, with the increase largely driven by lower costs for inputs.

Click here for a PDF version
Posted on Tuesday, September 21, 2021 @ 11:27 AM • Post Link Share: 
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.
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 © 2021 All rights reserved.