Arkansas Online

Housing starts show surprise increase

Apartments lead November gain

COMPILED BY DEMOCRAT-GAZETTE STAFF FROM WIRE REPORTS

New U.S. home construction unexpectedly strengthened in December to the fastest pace in nine months, led by apartment projects and suggesting builders found some success navigating shortages of materials and labor.

Residential starts rose 1.4% to a 1.70 million annualized rate from a 1.68 million pace in November, the Commerce Department reported Wednesday. For all of 2021, 1.6 million homes were started, a 15.6% surge from 2020 and the most since 2006.

Multifamily starts — which tend to be volatile and include apartment buildings and condominiums — climbed 10.7% to a

530,000 rate, the fastest since February 2020. Multi-family permit applications rose about 22%.

Single-family starts fell 2.3% in December to an annualized pace of 1.17 million units, the government’s report showed. At the same time, applications to build one-family dwellings increased 2% to the highest level since May.

Applications to build, a proxy for future construction, jumped 9.1% to an annualized 1.87 million units in December, the highest since January of last year. Permits in 2021 surged 17.2% from the previous year.

“Demand exceeds supply, and builders are working as hard as they can to catch up, a process that was always going to be measured in years, not months, after the massive shift in demand toward single-family homes sparked by the pandemic,” said Stephen Stanley, chief economist for Amherst Pierpont.

Home prices have surged over the past year as potential buyers compete for a very limited number of homes. Builders are racing to replenish inventory, but supply chain challenges, high commodities prices and a lack of skilled workers have stretched construction timelines and inflated backlogs.

Overall new home construction in the Northeast and Midwest rose more than 20% and 36% respectively. Starts slumped nearly 14% in the West and slipped 1.9% in the South.

Lawrence Yun, chief economist for the National Association of Realtors, told The Associated Press recently that with a 3 million to 4 million home shortage and builders able to supply less than 2 million homes a year, the market will continue to favor sellers.

First-time buyers, already facing challenges breaking in to the market, will struggle as both interest rates and prices continue to rise, Yun said.

Average long-term U.S. mortgage rates jumped again last week, reaching their highest level since March 2020, just as the coronavirus pandemic was breaking in the U.S.

Mortgage rates are expected to rise this year after the Federal Reserve announced last month that it would begin dialing back its monthly bond purchases — which are intended to lower long-term interest rates — as it attempts to get inflation under control.

“To the extent that 2022 brings anything new, it will be the question of whether higher home prices and/or rising mortgage rates will dampen demand enough to bring the market into better balance,” Stanley said in a note.

Looking ahead, the omicron variant and the corresponding surge in covid-19 cases could exacerbate the issues already faced by builders. Home building sentiment so far remains intact, though, with a gauge of builder confidence slipping just slightly in January.

A monthly survey of builder sentiment released Tuesday by the National Association of Home Builders and Wells Fargo showed sentiment ticking back down slightly to 83 in January from 84 in December, but remained stable and elevated. The index hit a record reading of 90 last November.

Business & Farm

en-us

2022-01-20T08:00:00.0000000Z

2022-01-20T08:00:00.0000000Z

https://edition.arkansasonline.com/article/283094187491824

WEHCO Media