Housing starts end 2020 strong, risks ahead

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While housing starts ended 2020 on a strong note, material prices and regulatory cost concerns could affect future production.

Washington, D.C.—While housing starts ended the year on a strong note, rising lumber prices and increasing regulatory cost concerns could affect future production, according to the National Association of Home Builders. Led by a solid, double-digit gain in single-family starts, overall housing starts increased 5.8% to a seasonally adjusted annual rate of 1.67 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The December reading of 1.67 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts increased 12% to a 1.34 million seasonally adjusted annual rate. The multi-family sector, which includes apartment buildings and condos, decreased 13.6% to a 331,000 pace.

Total housing starts for 2020 were 1.38 million, a 7% gain over the 1.29 total from 2019. Single-family starts in 2020 totaled 991,000, up 11.7% from the previous year. Multi-family starts in 2020 totaled 389,000, down 3.3% from the previous year.

“Builder concerns about a changing regulatory landscape may have triggered many to move up their plans to pull permits and put shovels to the ground,” said Chuck Fowke, NAHB chairman. “Our latest builder sentiment survey suggests somewhat softer numbers ahead due to rising building costs and an uncertain regulatory climate.”

The 1.34 million single-family starts pace in December is the highest since September 2006, according to Robert Dietz, NAHB chief economist. “And while NAHB is forecasting further production increases in 2021, the gains will be tempered by ongoing supply-side challenges related to material costs and delivery times, a dearth of buildable lots and regional labor shortages that continue to exacerbate affordability woes,” he said.

On a regional and year-to-date basis (January through December of 2020 compared to that same time frame a year ago), combined single-family and multi-family starts are 13.2% higher in the Midwest, 7.5% higher in the South, 6.2% higher in the West and 2.8% lower in the Northeast.

Overall permits increased 4.5% to a 1.71 million unit annualized rate in December. Single-family permits increased 7.8% to a 1.23 million unit rate. Multi-family permits decreased 3% to a 483,000 pace. Looking at regional permit data on a year-to-date basis, permits are 7.4% higher in the Midwest, 7.3% higher in the South, 2.1% higher in the West and 5.2% lower in the Northeast.

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