New single-family home construction is up by nearly 12% in 2020, while multifamily is off by more than 3%.
By Manuel Gutierrez, Consulting Economist to NKBA
New housing construction rose for the 11th consecutive year in 2020, with total starts reaching 1.38 million units for the year, up 7% over 2019. This is the highest production level since 2006, when new starts stood at 1.8 million. However, peak construction actually occurred the year before, in 2005, when total starts exceeded the 2 million mark. This is shown in the top-left panel of Figure 1.
The top-right panel displays total monthly housing starts for the last two years, with December 2020 reaching an annualized rate of 1.67 million units, up 5.8% from the prior month. The dotted horizontal line represents the annual total of 1.38 million units in 2020.
The short-lived collapse in housing construction at the beginning of the pandemic in March and April of last year was quickly reversed during the following months. Total housing starts increased virtually every month for the remainder of 2020, culminating in December reaching the highest monthly production since mid-2006.
Single-family starts, which account for roughly three-quarters of new residential construction, mimic the pattern of total housing starts. They saw a substantial 11.7% gain last year, with 991,000 new single-family homes, the highest level of production since 2007. In December, single-family starts recorded an annualized rate of 1.34 million units, significantly higher than the 991,000 for the full year. In fact, as the middle right panel shows, the rate of single-family starts exceeded the annual total every month since July.
The story is somewhat different for multifamily units, shown in the bottom-left panel of Figure 1. There were 389,000 multifamily units started last year, a drop of 3.3% from 2019. Unlike the steady gains for the single-family sector, multifamily construction has hovered around 375,000 to 400,000 units each year since 2015.
On a monthly basis, 2020 saw a 14% drop in multifamily starts in December, resulting in an annual rate of 331,000 units.
Three of the four U.S. regions registered gains in new housing starts when compared with the previous year (Figure 2). New residential construction in the Northeast, the smallest contributing region, comprising just 8% of the new homes built last year, saw a 2.8% drop in housing starts to 112,000 units. Additionally, unlike the other regions where about three-quarters of new homes built were single-family units, the Northeast is underrepresented, with only 55% of new homes falling within that category.
The biggest jump in housing starts last year was in the Midwest, with a 13.2% increase over 2019, for a total of 192,000 new homes started. The Midwest ranks third in terms of number of new houses built, generating just 14% of the national total last year. The Midwest and Northeast jointly account for less than a quarter of all new homes built.
The South, easily the largest region in terms of 2020 new residential construction, accounted for more than half of new homes built last year. It registered an annual gain of 7.5%, which represented a total of 736,000 new homes. Three-quarters of those homes, or 553,000 units, were for single-family. The graph in Figure 2 illustrates the steady growth in the South for the past decade.
The last of the four regions, the West, also saw the construction of more new homes last year than in 2019. Housing starts gain of 6.2%, or 341,000 units. The West accounts for a quarter of the nation’s new home construction output.
