According to the U.S. Department of Housing and Urban Development and the U.S. Census Bureau, overall housing starts increased 3.6 percent in May 2021 to a seasonally adjusted annual rate of 1.57 million units off of a downwardly revised April reading.
The May reading of 1.57 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 4.2 percent to a 1.10 million seasonally adjusted annual rate. The multifamily sector, which includes apartment buildings and condos, increased 2.4 percent to a 474,000 pace.
"Single-family starts held firm in May as demand remains strong despite recent gains in new home costs," said Chuck Fowke, chairman of the National Association of Home Builders (NAHB). "However, single-family permits posted a decline as higher construction costs are deterring some residential construction activity. Policymakers need to help the industry's supply-chains in order to protect housing affordability."
"Single-family permits declined to the lowest pace since September 2020 as the home building market cools somewhat to adjust to higher prices and longer delivery times of building materials," said NAHB Chief Economist Robert Dietz. "The count of single-family homes permitted but not started construction is up 53 percent over the last year due to both gains for home construction since the onset of the 2020 virus crisis and the delay of some building projects due to higher costs for materials and labor."
NAR's Chief Economist Lawrence Yun also commented, "The trend since the onset of the pandemic has been notably higher single-family homebuilding and subdued multifamily construction. That tilt is a proper response, given the limited single-family home inventory and what had been a deceleration in apartment rent growth."
"Despite the month-to-month trend, or even year-to-year changes, America is facing a massive housing shortage due to multiple years of underproduction in relation to population growth. We estimate around 5.5 to 6.8 million additional housing units need to be built. America is on track for only 1.6 million and 1.7 million new housing units this year and next, respectively. That would represent the best two-year performance in 15 years, yet it would still be inadequate. Therefore, expect both rents and home prices to outpace overall consumer price inflation in the upcoming years", concluded Yun.
On a regional and year-to-date basis (January through May of 2021 compared to that same time frame a year ago), combined single-family and multifamily starts are 46.3 percent higher in the Northeast, 37.2 percent higher in the Midwest, 19.0 percent higher in the South and 26.4 percent higher in the West. These gains come off of depressed activity levels from last spring.
Overall permits decreased 3.0 percent to a 1.68 million unit annualized rate in May. Single-family permits decreased 1.6 percent to a 1.13 million unit rate. Multifamily permits decreased 5.8 percent to a 551,000 pace.
Looking at regional permit data on a year-to-date basis, permits are 43.2 percent higher in the Northeast, 36.2 percent higher in the Midwest, 29.9 percent higher in the South and 33.7 percent higher in the West.
The number of single-family homes permitted but not started construction continued to increase in May, rising to 142,000 units. This is 52.7 percent higher than a year ago.
Meanwhile, the number of single-family homes under construction is up 27.8 percent year-over-year, having increased to 652,000 homes. The number of apartments currently under construction is relatively flat at 672,000 units.