Key Takeaways:
- Starts are on track to reach an annual rate of nearly 1.7 million
- Current levels are the highest YTD starts since 2006
- Three of the four regions show monthly gains, with the South accounting for over half the November starts
By Manuel Gutierrez, Consulting Economist to NKBA
Following several consecutive months of declines, housing starts unexpectedly surged in November by 11.8 percent to a 1.679 million annual rate (Figure 1). This is the highest level of new housing construction since March when starts were on a 1.725 million pace.
For the first eleven months of this year, builders have started construction on 1.47 million houses, 206,000 or 16% more than the same period last year. This is the highest number of year-to-date starts since 2006. Production through November is already 7 percent above last year’s total of 1.38 million houses started (indicated by the dashed gray horizontal line in the chart).
Construction for both major segments of the market, single and multifamily, contributed to last month’s increase. As can be seen in Figure 1, each reversed its declining trend of the last few months.
Housing starts in the South jumped by 18 percent in November and represent 56 percent of the national total.
Single family starts hit 1.173 million homes, 11.3 percent higher than October’s annual rate, which had been the lowest since February. However, November’s starts are 0.8 percent lower than the same month last year. Construction of housing units in multifamily buildings also increased sharply in November. Total multifamily rose 13 percent to a 506,000-unit annual rate. This is the highest production level since February of last year, just before the pandemic shutdown.
The number of housing permits issued also rose in November, although by a more modest 3.6 percent to a 1.71-million-unit rate. Single and multifamily permits both rose for the month.
Three of the four U.S. regions contributed to the total increase in housing starts. The largest and most significant was the South, which registered an 18 percent jump to a 933,000 annual-rate (Figure 2.) Starts in this region are 15.8 percent higher than the same month last year. The South currently accounts for more than half of the nation’s housing starts, 56 percent of the total in November.
The second most important region, the West, saw starts increase by a more modest 5 percent to a 412,000 annual rate. Housing starts in this region have hovered around the 400,000 level for the past year, except for a sharp, inexplicable drop in August to 327,000 units. The other region showing gains was the Northeast, which grew a sharp 27 percent over October. However, since it represents under 8 percent of total U.S. housing starts, even such a large percentage gain doesn’t have a great effect on the overall picture.
On the other hand, the Midwest was the only region posting a drop in housing starts, falling 7 percent to a 204,000-unit annual rate. However, it too had minimal impact, given the region represents just 12 percent of starts nationally.
Despite the surge in housing starts last month, builders continue to face labor and material shortages, hampering their ability to complete houses on a timely basis.
Figure 3 displays the number of houses currently under construction. As can be seen, it has been increasing steadily since 2012. However, the pace has picked up noticeably since last year. In fact, the number of houses under construction is the highest since 1973. The current number is even higher than the previous peak of 1.424 million houses under construction in January 2006.
