Housing Starts Reach Highest Levels Since 2006

Residential construction recovered in March after a serious decline the prior month. The U.S. Census Bureau and Department of Housing and Urban Development said all three measures rose, with housing starts hitting a 15 year high. Some regional increases topped 100 percent.

Permits for residential construction were issued at a seasonally adjusted annual rate of 1.766 million in March, a 2.7 percent increase from February's rate of 1.720 million. The latter is an upward revision from the 1.682 million permits originally reported for February, erasing some of the near 11 percent loss originally reported. The permitting rate for the month was 30.2 percent higher than in March 2020.

There was some disagreement among analysts polled by Econoday and Trading Economics in forecasting the month's results and both missed the mark. The consensus from Econoday was 1.620 million permits while Trading Economics placed them at 1.75 million, the high end of Econoday's range.

Single family permits were issued at an annual rate of 1.199 million, up 4.6 percent month over month and 35.6 percent above the rate a year earlier. Multifamily permits at a 508,000 rate were down 3.6 percent from February but 19.2 percent higher on an annual basis.

On a non-adjusted basis there were 158,300 permits issued, up from 120,100 the prior month. Single-family permits totaled 110,800 compared to 81,100 in February.

For the year-to-date (YTD) there have been 406,300 permits issued, 275,700 for single family homes and 118,300 for units in buildings with five or more. Thus far in 2020 the relative numbers were 329,400, 220,400, and 98,700.

U.S. builders started construction on residential units at a seasonally adjusted annual rate of 1.739 million units. It was the highest rate of production since June 2006 and a 19.4 percent increase from February's revised rate (from 1.421 million) of 1.457 million. It beat starts in March 2020 by 37.0 percent.

Consensus estimates for housing starts were also low. Trading Economics had a consensus forecast of 1.613 million, while Econoday's analysts predicted 1.750 million.

Single-family starts were up 15.3 percent to 1.238 million, 40.7 percent higher than a year earlier. The February estimate of 1,040 million was revised to 1.074 million. Multifamily starts rose 30 percent month over month and 26.9 percent on an annual basis to 477,000 units.

On an unadjusted basis there were 144,400 residential units started in March compared to 103,100 in February. Single-family starts numbered 103,700 and 74,800, respectively.

Thus far in 2021 there have been 362,700 housing starts compared to 329,200 in the first three months of 2020. Single-family starts are up from 214,400 to 256,500 while multifamily starts fell from 111,800 to 102,000.

Lawrence Yun, chief economist for the National Association of Realtors®, said the following about the residential construction report. "The housing inventory shortage has been pushing up prices, but also holding back home sales. In nearly every market, 20 percent more inventory means 20 percent more home sales. Today's news on the new home construction surge is, therefore, highly welcomed, especially in light of major challenges on material costs and soaring lumber prices. After 13 straight years of underproduction - the chief cause for today's inventory shortage - this construction boom needs to last for at least three years to make up for the past shortfall. As trade-up buyers purchase newly constructed homes, their prior homes will show up in MLSs, and hence, more choices for consumers. Housing starts to housing completion could be 4 to 8 months, so be patient with the improvement to inventory. In the meantime, construction workers deserve cheers."

Completions rose 16.6 percent from February to 1.580 million annual units, 1.099 million of them single-family houses. The rate of completions is 23.4 percent higher than in March 2020, with single-family completions increasing 21.1 percent. Multifamily units were completed at a rate of 476,000 units, a 58.1 percent increase from the previous month and up 30.4 percent year-over-year.

Completions numbered 126,400 on an unadjusted basis compared to 94,700 in February and 88,400 single-family houses were brought on line, up from 74,000 the prior month. YTD, builders have finished 314,700 housing units compared to 282,700 at the same time last year. Single family completions are up 14.1 percent to 234,600 and 78,800 multifamily units have also been completed, a 4.9 percent increase.

There were 1.306 million housing units under construction at the end of March, 636,000 of them single family units. In addition, 217,000 permits have been issued for construction not yet begun. The single-family backlog was 124,000.

Permits in the Northeast declined by 8.0 percent compared to the previous month but were 42.9 percent higher on an annual basis. Starts soared by 64.0 percent from February and 116,700 year-over-year. Completions increased by 30.3 percent and 82.1 percent for the month and the year.

The Midwest had a 2.0 percent increase in permitting, putting the rate up 46.0 percent compared to March 2020. Starts increased by 122.8 percent and 87.0 percent for the two periods. Completions were up 17.6 percent for the month and 12.4 percent on an annual basis.

Permitting in the South rose 6.4 percent for the month and 26.6 percent from the previous March. There were 13.5 percent more starts in March than in February, a gain of 24.0 percent from a year earlier and completions rose 16.9 percent and 22.5 percent.

Permitting was unchanged in the West from a month earlier but was running 25.9 percent ahead of a year earlier. Starts were down 13.6 percent from February but were 19.5 percent higher than the prior March. Completions increased 10.5 percent for the month and were up 17.7 percent annually.