According to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau, while U.S. housing starts ended the year on a strong note, rising lumber prices and increasing regulatory cost concerns could affect future production. Led by a solid, double-digit gain in single-family starts, overall housing starts increased 5.8 percent to a seasonally adjusted annual rate of 1.67 million units.
The December reading of 1.67 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts increased 12.0 percent to a 1.34 million seasonally adjusted annual rate. The multifamily sector, which includes apartment buildings and condos, decreased 13.6 percent to a 331,000 pace.
Total housing starts for 2020 were 1.38 million, a 7.0 percent gain over the 1.29 total from 2019. Single-family starts in 2020 totaled 991,000, up 11.7 percent from the previous year. Multifamily starts in 2020 totaled 389,000, down 3.3 percent from the previous year.
"Builder concerns about a changing regulatory landscape may have triggered many to move up their plans to pull permits and put shovels to the ground," said Chuck Fowke, chairman of the National Association of Home Builders (NAHB) and a custom home builder from Tampa, Fla. "Our latest builder sentiment survey suggests somewhat softer numbers ahead due to rising building costs and an uncertain regulatory climate."
"The 1.34 million single-family starts pace in December is the highest since September 2006," said NAHB Chief Economist Robert Dietz. "And while NAHB is forecasting further production increases in 2021, the gains will tempered by ongoing supply-side challenges related to material costs and delivery times, a dearth of buildable lots and regional labor shortages that continue to exacerbate affordability woes."
On a regional and year-to-date basis (January through December of 2020 compared to that same time frame a year ago), combined single-family and multifamily starts are 13.2 percent higher in the Midwest, 7.5 percent higher in the South, 6.2 percent higher in the West and 2.8 percent lower in the Northeast.
Overall permits increased 4.5 percent to a 1.71 million unit annualized rate in December. Single-family permits increased 7.8 percent to a 1.23 million unit rate. Multifamily permits decreased 3.0 percent to a 483,000 pace.
Looking at regional permit data on a year-to-date basis, permits are 7.4 percent higher in the Midwest, 7.3 percent higher in the South, 2.1 percent higher in the West and 5.2 percent lower in the Northeast.
The National Association of Realtors Chief Economist Lawrence Yun commented, "Home construction finished the year with the biggest bang since 2006 with 1.669 million units started for construction in December (annualized). That means the worst of the housing shortage could soon come to an end. More inventory is clearly needed to lessen the heat of multiple offers and the consequent frustration of multiple losing bids. Homebuilders rightly favored single-family units over multifamily condominiums and apartments. Single-family units started at 1.338 million were 28% above one year ago, while multifamily units of 331,000 were 39% lower. Consumers, in light of the pandemic and work-from-home flexibility, have shown a preference for larger-sized homes."
Yun continued, "For 13 straight years prior, home builders have been underproducing below historic norms. Therefore, it will take robust home construction this year and next, at a minimum, to fully supply the market to properly meet the demand. More construction also means more local job creation. The housing sector looks to lead the economy in recovery in 2021."