Data released on Tuesday showed Housing Start and Building Permits rose above expectations in August. Analysts at Well Fargo point out that multifamily units accounted for all the strength in starts, reflecting strong demand for apartments.
They mentioned builders are increasingly having to limit sales, as they are uncertain when they will be able to complete homes due to ongoing shortages of essential building materials.
Key Quotes:
“Housing starts rose 3.9% in August to a 1.615 million-unit annual pace and starts for the prior month were also revised modestly higher. Multifamily starts accounted for all of this past month's increase, rising 20.6% to a 539,000-unit annual rate. Demand for apartments has been surprisingly strong and rents have risen, giving developers confidence to move projects forward.”
“The strength in multifamily starts is not coming at the expense of single-family construction. The single-family market is experiencing shortages in essential building materials and skilled construction workers.”
“The most encouraging aspect of the September HMI is the slight improvement in underlying demand. The present sales index rose one point to 82, following four months of decline. Prospective buyer traffic also improved, although it remains well below levels seen earlier this year.”
“The influx of buyers from higher-priced housing markets has skewed new home sales more toward the upper-end of the price spectrum. Builders have focused their attention at this end of the market as well, contributing to the dearth of more affordable homes currently on the market.”
“While single-family starts and permits both declined in August, the backlog of permitted homes where construction has not yet started rose 1.4% and is now 50% higher than it was last August, sitting at 147,000 units. Most of the increase was in the West, where material and labor shortages have been particularly troublesome.”