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Boston New Home Construction Drops. Here’s Why
Housing starts slid in November as builders moved to complete homes already underway and cut back on seeking permits for new construction.
Housing starts, which include construction of new single-family and multifamily residences, declined 0.5% month over month to a seasonally adjusted annual rate 1,427,000 units, the U.S. Census Bureau and the U.S. Department of Housing and Urban Development said in a press release. Year over year, starts were down 16.4%.
New single-family home starts fell 4.1% from October’s revised annual estimate to 828,000, while multifamily starts rose 4.8% to 584,000. On a yearly basis, the rate of single-family starts was down 32.1%, while multifamily was up 24.5%.
Permits, a leading indicator of future new-home supply, fell 11.2% month over month and 22.4% year over year to 1,342,000 units, while housing completions jumped 10.8% month over month and 6% year over year to an annual rate of 1,490,000 in November.
Compass President Neda Navab said the decline in permitting — one of the largest monthly drops of the last decade — and increase in completions could have “worrisome” long-term consequences for housing supply.
“It’s not easy for builders to balance the short-term pullback in demand with the long-term need for more housing nationwide, but on the surface, it seems a more reasonable strategy would be to pull back on short-term starts and keep the longer-term permit pipeline as full as possible,” Navab said. “That builders have instead taken the opposite path — clearing out those homes already permitted, but leaving the cupboard barer for tomorrow — does not bode well for a nation that remains under-built.”
First American deputy chief economist Odeta Kushi said the month’s figures reflect waning homebuilder confidence, which has fallen for 12 consecutive months.
“Housing demand is weakening, while builders continue to face higher costs and supply-side headwinds,” Kushi said. “As builders pull back on starting new projects, they will have greater opportunity to bring to market the backlog of homes in their pipelines that are already under construction.”
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New-home construction falls in July
The pace of new residential construction fell on a month-over-month basis in July.
Privately owned single-family housing starts slid 4.5% on a monthly basis to 1,111,000, according to the U.S. Census Bureau and the Department of Housing and Urban Development. Year over year, that represents an 11.7% gain from the July 2020 rate of 995,000.
Including the single-family rate and that of buildings with five or more units, the national rate was down 7% month over month to 1,534,000.
The seasonally adjusted annual rate for privately owned housing units authorized by building permits was at 1,635,000 in July, up 2.6% from June’s revised rate and up 6% from July 2020.
“The bright spot in an otherwise underwhelming report comes from the increase in the overall number of permits issued, which can signal how much home construction is in the pipeline,” First American deputy chief economist Odeta Kushi said. “The importance of more home building cannot be overstated. Inventory has been increasing in recent months, but we have underbuilt for a decade, and July’s month-over-month decline in housing starts isn’t welcome news.”
Privately owned housing completions hit an annual rate of 1,391,000 in July, up 5.6% from June’s revised rate and 3.8% from a year earlier.
By region, July new construction activity was strongest in the South, where it rose 2.1% from June, followed by the Midwest, where it fell 6.9% and the West, with an 11.3% gain. The pace of housing starts plunged 49.3% in the Northeast, however.
“There are concerns that higher new home prices may be causing some would-be buyers to pull back from the market,” Kushi said. “Not to mention, builders continue to face a shortage of skilled labor, materials and lots, all headwinds to increasing the pace of new home construction.”
Boston Condos for Sale
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Boston Condos for Sale
Boston New Home Construction Drops. Here’s Why
- Single-family housing starts dropped more than 13% in April compared with March, according to the U.S. Census.
- Prices for new and existing homes are at record levels, and the increases are accelerating at the fastest clip in over 15 years.
- Roughly 15% of builders said they are putting down concrete foundations and then holding off on framing the house.
