New Residential Construction Trends Point To Turn Around In Housing Inventory

New residential construction and lumber prices share an intimate relationship.

A major cause of today’s inventory shortage is the underproduction of new-construction homes over the previous 13 years. This underproduction was further exacerbated over the last year by material shortages and rising costs of lumber, due to Covid-19 supply chain impacts.

The U.S. Census Bureau recently reported that new-home construction has surged after a winter shut down, with March’s figure of 1.74 million housing starts marking the highest in 14 years. This is a 37% increase from March of 2020. This figure includes both single-family units and multifamily units.

The U.S. Census Bureau and the U.S. Department of Housing and Urban Development jointly announced the following new residential construction statistics for March 2021

The largest gains in new construction are in the Midwest. The South and Northeast are also seeing increases in new-home construction, though new-construction activity is slowing in the West.

To add to the good news, the pace of permitting for new homes is also on an upward climb, up 2.7% in March from February and 30% from March 2020. Permits for duplexes, triplexes, and quadplexes surged by 25.5%, though authorizations for multifamily developments in general dropped by 4%.

Housing completion typically takes 4 to 8 months and an improvement in available inventory is on the horizon. But one must ask next – With the cost of lumber being what it is, what does this mean for affordability?

View the report: U.S Census Bureau and the U.S. Department of Housing and Urban Development MONTHLY NEW RESIDENTIAL CONSTRUCTION, MARCH 2021

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New residential construction trends August 2022

Update August 16, 2022: New housing starts have fallen to the lowest levels since July 2001, according to Bloomberg.

“Residential starts dropped by nearly 10% last month to a 1.45 million annualized rate from a revised 1.6 million pace in June, the government data showed. Applications to build, a proxy for future construction, declined 1.3% to 1.67 million.
Prices for commodities like lumber have eased in recent months, though builders continue to struggle to fill open positions, especially more skilled roles. Two-thirds of construction firms reported few or no qualified applicants in a July survey of small businesses. “
-BloomberG