Chart: August Housing Starts Boosted by Multifamily

Total housing starts increased 3.9% in August, due to strength for multifamily development. According to data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau, single-family starts were down 2.8% for the month, while overall multifamily starts was up 21% in August.

The August total starts reading of 1.62 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 came in at a 1.08 million seasonally adjusted annual rate. Single-family housing starts are up 23.8% on a year-to-date basis; however, the numbers are distorted by the weak readings of the Summer of 2020.

Single-family builder confidence ticked up one point to a level 76 on some easing for material prices, according to the NAHB/Wells Fargo Housing Market Index (HMI). After peaking at a level of 90 last November, builders report growing concerns over increasing lumber and other construction costs, as well as delays in obtaining building materials.

While the single-family sector has been cooling off the unsustainable seasonally adjusted pace of last Winter, recent forward-looking readings, including the HMI, suggest that trend is now stabilizing. For example, single-family permits have been stable since June. It is worth noting however that the number of single-family homes permitted but not started construction continues to be elevated, up 50% year-over-year to 147,000 single-family homes, a clear sign of ongoing supply-chain issues.

The multifamily sector, which includes for-rent apartment buildings and condos, recorded a 539,000 annual rate for 2+ unit construction. After posting a slight decline in 2020, 5+ unit production is up 16.6% on a year-to-date basis. However, the “missing middle,” 2 to 4 unit production is approximately flat for the year (0.8% gain on a year-to-date basis).

On a regional and year-to-date basis, combined single-family and multifamily starts are 35.9% higher in the Northeast, 14% higher in the Midwest, 20.2% higher in the South and 23.9% higher in the West.

As an indicator of the economic impact of housing, there are now 702,000 single-family homes under construction. This is 32.7% higher than a year ago. There are currently 702,000 apartments under construction, up 3% from a year ago. Total housing units now under construction (single-family and multifamily combined) is 15.8% higher than a year ago.

Overall permits increased 6.0% to a 1.73 million unit annualized rate in August. Single-family permits increased 0.6% to a 1.05 million unit rate. Multifamily permits increased 15.8% to a 674,000 pace.

Looking at regional permit data on a year-to-date basis, permits are 25.6% higher in the Northeast, 21.7% higher in the Midwest, 25.6% higher in the South and 28.1% higher in the West.