Home builders fail to keep pace with rising demand

Builders say they’re struggling to keep up with demand as more buyers look for newly-built homes amid an acceleration in home buying.

A report from the U.S. Census Bureau last week said single-family starts stayed flat in November as builders were unable to meet demand. Overall housing starts gained by 1.2% to a seasonally adjusted annual rate of 1.55 million, up 13% from a year ago. The Census Bureau data shows the pace of building permits, a gauge of future construction, is at its highest level in 14 years.

“Though single-family construction continued to be strong in November, builders are unable to keep up with demand due to rising regulatory and construction costs and shortages of lots and labor,” Chuck Fowke, chairman of the National Association of Home Builders, commented on the news “The incoming Biden administration needs to focus on policies to improve housing affordability and to increase supply to help housing continue to lead the economy forward.”

Robert Dietz, chief economist of the NAHB, said that single-family construction has been a “bright spot” amid the economic challenges of 2020. He added that single-family starts are up 10% compared to a year ago, posting their best year since the Great Recession.

“However, the backlog continues to grow, with the number of single-family homes permitted but not started construction up 16.3% from November 2019 to November 2020 as material delays and higher costs hold back building,” Dietz added.

Combined single-family and multifamily starts have been highest in the Midwest, up 14.4% from January through November when compared to a year ago. The South has seen starts increase by 7.6% in that time period, followed by a 5.4% uptick in the West. The Northeast has seen the only decrease in that time—3.3% lower.

Permit meanwhile rose 6.2% in November, but a bulk of that was from an increase in multifamily permits, which reflect apartment building and condo construction. Permits are highest on a year-to-date basis in the South (up 6.9%), followed by the Midwest (up 5.7%), and the West (0.7%). Permits dropped 4.4% in the Northeast.