January 2021

Will new construction reduce home inventory shortfalls?

MonthNational New Single-Family (SF) Units SoldNational New SF Units StartedNortheast New SF Units StartedMidwest New SF Units StartedSouth New SF Units StartedWest New SF Units Started
September, 202075000973006500130005550022300
August, 202082000927005200153004860023600
July, 202084000939007500141005120021000
June, 202079000868007800144004540019200
May, 202064000675003100104003630017700
April, 20205200063100210095003790013700
March, 20205900074000430078004100020800
February, 20206300073000320068004690016100
January, 20205900067400400066003870018100
December, 20194900068900440089004050015200
November, 20195000068000520088003640017600
October, 201955000768003800116004270018600
September, 201956000786005600114004400017700
August, 201957000809005600123004230020700
July, 201955000838006200129004330021400
June, 201966000829004700130004420021100
May, 201956000776004600118004440016900
April, 201964000816006000114004250021700
March, 20196800069700420069004200016600
February, 20195700054800220050003520012300
January, 20194900064100470058003950014200
December, 20183800052600390055003210011200
November, 20184400058500500091003130013100
October, 201843000749007200122003580019800
September, 201846000750005300127003630020800
August, 201847000808006100109004320020500
July, 201852000818006700140004150019600
June, 201856000835007200119004250021800
May, 201862000887006200166004500020900
April, 201861000851005300103004830021100
March, 20186600072500460096003760020800
February, 20185400062400340050003590018100
January, 20184800059900360055003600014800
December, 20174500055100340068002940015500
November, 201750000691005000113003610016700
October, 201749000757006200144003900016200
September, 201750000725006800124003500018300
August, 201745000781006300110004190018900
July, 201748000794006700118004210018800
June, 201756000838006100145004260020600
May, 201757000769005200146003910018000
April, 201756000769004400123004070019500
March, 20176100069500490073004110016100
February, 20175100058800350076003360014100
January, 20174500053100340062003240011100
December, 20163900052900410070002820013500
November, 201640000606004800113003170012800
October, 201646000734006400122003770017200
September, 201644000674005500112003580014900
August, 201646000665004900108003430016600
July, 201654000726005600111003850017400
June, 201650000750007200122003890016700
May, 201653000702005300111003850015200
April, 201655000725005300130003920015000
March, 20165000062200430080003460015200
February, 20164500058000300073003380013900
January, 20163900050200370057002990010900
December, 20153800050200440062002860010900
November, 20153600057000530084002980013300
October, 201539000589005400112002970012600
September, 201535000650005000111003510013900
August, 201541000664005200103003800012900
July, 201543000718006700124003520017500
June, 201544000694004400106003850015900
May, 201547000665005300108003420016200
April, 201548000695005300122003410017800
March, 20154600052900340061003110012200
February, 20154500040600120035002590010000
January, 20153900046400320045002680011900

Since mid-April 2020, when housing construction went into a momentary retreat over the coronavirus, new housing starts have gone into overdrive. Current data shows that September 2020's single-family home starts jumped 4.9% from the previous month and were up year-over-year by 23.7%.Footnote1

Given the current shortfall of available single-family homes, as well as historically low mortgage interest rates, this is not surprising. First-time homebuyers, especially millennials entering their prime home buying years, are creating demand that is far outpacing the turnover of existing homes and are looking for new and affordable single-family construction.

Housing starts and eventual sales

To better understand the relationship between single-family housing starts (gray bars) and sales (red line) in the graph above, be aware that there's roughly a seven-month delay between the two. For instance, the July 2019 housing starts peak of 83.8k loosely corresponds to the subsequent February 2020 sales peak of 63k units.Footnote1 Likewise, based on the recent June through September 2020 acceleration in housing starts, one can anticipate greater home sales this winter or early spring. This forecast, however, holds no guarantees.

Geographically, there is broad variability in the rate of new single-family (SF) housing starts. Not surprisingly, the South and West are leading the charge. This not only reflects interstate migration over the past decade, but the greater availability of affordable suburban and exurban land. See the table above for details.Footnote1

Looking back to look ahead

It also helps to view current events on a longer timeline. While today's home buying optimism is driving new housing starts to levels not seen since the pre-2008 housing boom, they're far below the huge number of starts that occurred during the early 2000s. At that time, peak single-family home starts rose consistently from 122.6k in May 2000 to 170.4k in May 2005, which are 26% to 75% higher than the starts in September 2020!Footnote1

Currently, many questions remain, including: Will builders follow the typical winter slowdown or last year's lead and build through the colder months? What will be the upper limit of new housing starts? Could the market rise to and sustain levels of 125k starts a month?

The potential impact

Undoubtedly, new construction will help mitigate the inventory deficit. But to what degree? Factors such as regulation, land availablity, material costs, geography, interest rates and labor shortages will all have an impact, and only time itself will provide a definitive answer.

1 The Census (2020). New Residential Sales/Construction, 2000-2020. October 2020 Release (Accessed November 4th, 2020).

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