The latest report on new residential construction from the U.S. Department of Housing and Urban Development (HUD) and the U.S. Census Bureau found that housing starts dropped in April 2021, hitting 1.57 million units, down 9.5% from March, but is 67.3% above the April 2020 rate of 938,000.
"Overall, April’s dip in housing starts isn’t all that surprising given the shortages in lumber and labor that are hitting the country,” said LendingTree's Chief Economist Tendayi Kapfidze. “While these issues present a notable challenge, both builder sentiment and demand for new homes remain strong, suggesting the housing market won’t go belly-up anytime soon. It is difficult to say with any certainty what the future will bring for builder confidence. In the coming months, material cost issues, as well as problems related to labor shortages will likely remain the major concerns for builders across the country. While these issues have the potential to hamper builder confidence, if rates remain low and consumer demand for new housing continues to remain strong, builder confidence will probably remain strong as well."
In terms of home sales, Redfin has found that a record $2.53 trillion worth of home sales will transact in America in 2021—a 17% year-over-year gain and the largest annual increase in percentage terms since 2013.
Single‐family housing starts in April were at a rate of 1,087,000, 13.4% below the revised March figure of 1,255,000. The April rate for units in buildings with five units or more was 470,000.
Low rates and strong demand continue to drive the market, as overall permits increased 0.3% to a 1.76 million unit annualized rate in April, while single-family permits decreased 3.8% to a 1.15 million unit rate. Multifamily permits increased 8.9% to a 611,000 pace. Regionally, permits were 8.4% higher in the Northeast, 9.9% lower in the Midwest, 3.9% higher in the South, and 4.1% lower in the West.
“Overall, a soft report reflecting an industry trying to keep pace with demand but facing strong headwinds,” said First American Deputy Chief Economist Odeta Kushi. “For a bright spot, building permits, a leading indicator of future starts, remain strong. The number of single-family homes permitted, but not started increased to 131,000 units–47% higher than a year ago. This means more construction is in the pipeline.”
A recent analysis from the National Association of Home Builders (NAHB) found that the price of lumber has tripled over the past year, forcing the price of a new single-family home to rise $35,872 on average.
“Housing starts and permits posted a monthly decline in April, as escalating prices for lumber and other building materials price out some home buyers from an otherwise hot housing market,” said NAHB Chairman Chuck Fowke. “Policymakers need to prioritize the U.S. supply chain for items like building materials to ensure builders can add the additional inventory the housing market desperately needs.”