- U.S. single-family homebuilding fell for a second straight month in August as builders continued to struggle with shortages of materials and labor.
- The data suggests the housing market could remain a drag on economic growth in the third quarter.
- Builders' inability to ramp up the production of single-family homes amid a massive housing shortage is driving up prices and keeping some first-time buyers from the market.
U.S. single-family homebuilding fell for a second straight month in August as builders continued to struggle with shortages of materials and labor, suggesting the housing market could remain a drag on economic growth in the third quarter.
The report from the Commerce Department on Tuesday also showed the number of houses authorized for construction but not yet started raced to a record high last month, a sign of reluctance by builders to take on new projects.
Single-family starts, which account for the largest share of the housing market, dropped 2.8% to a seasonally adjusted annual rate of 1.076 million units last month. The decline was, however, offset by a surge in starts for the volatile multi-family segment.
As a result, overall housing starts advanced 3.9% to a rate of 1.615 million units in August. Data for July was revised up to a rate of 1.554 million units from the previously reported 1.534 million units. Economists polled by Reuters had forecast starts would rebound to a rate of 1.555 million units. Housing starts jumped 17.4% compared to August 2020.
Single-family starts dropped in the West and Midwest. They rose in the Northeast and the densely populated South.
Permits for future homebuilding rose 6.0% to a rate of 1.728 million units in August. Single-family permits gained 0.6% to a rate of 1.054 million units. Permits for buildings with five units or more jumped 19.7% to a rate of 632,000 units, the highest level since January 1990.
"We conjecture that this strength in multi-family may be a response to the strong increase in asking rents and the low vacancy rates in rental units," said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.
The backlog of homes yet to be started increased 3.7% to 251,000 units, a record high. Single-family homes yet to be started were near a 15-year high.
"Supply issues will constrain production for some time yet and we expect single-family starts will see only a gradual rise from here, reaching 1.16 million annualized by end-2021 and 1.20 million annualized by end-2022," said Matthew Pointon, a senior property economist at Capital Economics in New York.
Housing completions fell 4.5% to a rate of 1.330 million units last month. Single-family home completions rose 2.8% to a rate of 971,000 units. The pandemic has lengthened the time from when a permit is issued for single-family home construction to completion, which economists blame on supply constraints.
The inventory of previously owned homes is near record lows, leading to record double-digit annual growth in home prices.
Realtors estimate that single-family housing starts and completion rates need to be in a range of 1.5 million to 1.6 million units per month to close the inventory gap.
The stock of housing under construction increased 1.7% to a rate of 1.404 million units last month.
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