Housing Permits Fall Back Again in August

2022-09-20T10:16:29-05:00

In August, housing starts rebounded but housing permits declined for the second straight month. The August drop in building permits indicates that the housing market is continues to cool as rising construction costs, elevated mortgage rates and supply chain disruptions continue to act as a drag on the market. Overall housing starts rose 12.2% to a seasonally adjusted annual rate of 1.58 million units in August, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The August reading of 1.58 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Single-family starts increased 3.4% to a 935,000 seasonally adjusted annual rate and are down 4% on a year-to-date basis. Declines are expected ahead, as single-family permits decreased 3.5% to an 899,000 annualized rate and are down 6.6% on a year-to-date basis. NAHB is forecasting 2022 to be the first year since 2011 to record an annual decline in single-family home building. A housing recession is underway with builder sentiment falling for ninth consecutive months. In September, single-family builder confidence decreased three points to a level of 46, the lowest level since May 2014 with the exception of the spring of 2020, according to the NAHB/Wells Fargo Housing Market Index (HMI). Builders are reporting weakening traffic as housing affordability declines. The multifamily sector, which includes apartment buildings and condos, increased 28% to an annualized 640,000 pace. Multifamily construction remains very strong given solid demand for rental housing. The number of multifamily 5+ units currently under construction is up 26.5% year-over-year. Multifamily development is being supported by a substitution effect, with frustrated or priced out prospective home buyers seeking rental housing. However, multifamily permits decreased 17.9% to an annualized 618,000 pace. The number of single-family homes permitted but not started construction peaked in July due to supply-chain issues. In August, there were 143,000 homes authorized but not started construction. The number of multifamily 5+ units permitted but not started construction is down 31.2% year-over-year to 143,000 units. On a regional and year-to-date basis, combined single-family and multifamily starts are 4.6% higher in the Northeast, 2.4% lower in the Midwest, 5.6% higher in the South and 1.5% lower in the West. Looking at regional permit data on a year-to-date basis, permits are 3.1% lower in the Northeast, 1.2% higher in the Midwest, 1.2% higher in the South and 1.4% lower in the West. As an indicator of the economic impact of housing and as a result of accelerating permits and starts in recent quarters, there are now 812,000 single-family homes under construction. This is 14% higher than a year ago. There are currently 890,000 apartments under construction (2+ unit properties), up 27% from a year ago with this number continuing to rise. This is the highest level since the first quarter of 1974. Total housing units now under construction (single-family and multifamily combined) is 21% higher than a year ago. The number of single-family units in the construction pipeline is now falling and will continue to decline in the months ahead given recent declines in buyer traffic. Related ‹ Builder Confidence Falls for Ninth Straight Month as Housing Slowdown ContinuesTags: economics, home building, housing, multifamily, starts

Housing Permits Fall Back Again in August2022-09-20T10:16:29-05:00

Modular and Other Non-Site Built Housing In 2021

2022-09-08T09:21:54-05:00

By Danushka Nanayakkara-Skillington on September 8, 2022 • The total market share of non-site built single-family homes (modular and panelized) was at 2% of single-family completions in 2021, according to Census Bureau Survey of Construction data and NAHB analysis. This share has been steadily declining since early-2000s despite the high-level of interest for non-site built construction. In 2021, there were 24,000 total single-family units built using modular (10,000) and panelized/pre-cut (14,000) construction methods, out of a total of 970,000 total single-family homes completed. While the market share is small, there exists potential for expansion. This 2% market share for 2021 represents a decline from years prior to the Great Recession. In 1998, 7% of single-family completions were modular (4%) or panelized (3%). This marked the largest share for the 1992-2021 period. One notable regional concentration is found in the Midwest where 6% (7,000 homes) of the region’s 125,000 housing units were completed using non-site build construction methods, the highest share in the country. With respect to multifamily construction, approximately 1% of multifamily buildings (properties, not units) were built using modular and panelized methods. Similarly to single-family construction, this market share was expected to grow, but the expected gains did not materialize due to various constraints in the industry. In the year 2000 and 2011, 5% of multifamily buildings were constructed with modular (1%) or panelized construction methods (4%). Related ‹ Share of Smaller Lots Record High Amid PandemicTags: economics, home building, housing, modular, multifamily, panelized, single-family, SOC, systems built

Modular and Other Non-Site Built Housing In 20212022-09-08T09:21:54-05:00

Rent Price Increased for Fifth Consecutive Quarter

2022-08-25T09:19:15-05:00

By Fan-Yu Kuo on August 25, 2022 • Data from the Survey of Market Absorption of Apartments (SOMA), produced by the Census Bureau, suggest continued improvement for the multifamily sector in the first quarter of 2022 due to strong demand and low vacancy rates. However, the decline in the number of apartment and condominium completions in the first quarter of 2022 reflects the ongoing supply chain challenges. The absorption rate of unfurnished, unsubsidized apartments (the share rented out in the first three months following completion) rose by 5 percentage points to 62 percent in the first quarter of 2022 (from 57 percent in the first quarter of 2021) (Figure 1). Meanwhile, the number of apartments completed was down during this period, from 64,660 units in the first quarter of 2021 to 52,520 units in the first quarter of 2022 (about a 16.0 percent decrease). The median asking rent for apartments increased from $1,768 in the first quarter of 2021 to $1,832 in the first quarter of 2022 (a 4 percent gain). This is the fifth consecutive quarter with a year-over-year increase in median asking rent price. The SOMA also provides data on condominium completions and absorption (Figure 2).  Condominium absorption increased to 80 percent in the first quarter of 2022 (from 70 percent in the first quarter of 2021).  Meanwhile, condominium completions fell from 3,349 in the first quarter of 2021 to 3,174 in the first quarter of 2022. The median asking sales price of condominiums rose to $682,500 in the first quarter of 2022, 17 percent higher than the asking sales price of $582,600 in the first quarter of 2021. Related ‹ Slight Uptick for Missing Middle?Tags: Absorption Rate, multifamily, SOMA

Rent Price Increased for Fifth Consecutive Quarter2022-08-25T09:19:15-05:00

Slight Uptick for Missing Middle?

2022-08-24T08:18:21-05:00

By Robert Dietz on August 24, 2022 • The missing middle construction sector includes development of medium-density housing, including townhouses, duplexes and other small multifamily properties. While townhouse construction has trended higher in recent quarters, the multifamily segment of the missing middle (apartments in 2 to 4 unit properties) has disappointed. For 2021, there were only 12,000 starts of such residences. This is flat from from 2020, during a period of time when most construction segments expanded. For the second quarter of 2022, there were just 5,000 2 to 4 unit housing unit construction starts. If accurate after revisions, that would mark the best quarter for this market segment since the middle of 2008. However, the gain is small, so it is not statistically significant. Nonetheless, it does match a pickup in permits for 2 to 4 unit production registered earlier in 2022. As a share of all multifamily production, 2 to 4 unit development is only 3.4% of the total. In contrast, from 2000 to 2010, such home construction made up a little less than 11% of total multifamily construction. Construction of the missing middle has clearly lagged during the post-Great Recession period and will continue to do so without zoning reform focused on light-touch density. Related ‹ New Home Sales Plummet in JulyTags: economics, home building, housing, missing middle, multifamily

Slight Uptick for Missing Middle?2022-08-24T08:18:21-05:00

Jump for Multifamily Rental Development

2022-08-22T08:30:11-05:00

By Robert Dietz on August 22, 2022 • According to NAHB analysis of quarterly Census data, the count of multifamily, for-rent housing starts surged during the second quarter of 2022. At 142,000 units started, this was the largest quarter for rental multifamily construction since the second quarter of 1986. The market share of rental units of multifamily construction starts bounced back to 96%. In contrast, the historical low share of 47% was set during the third quarter of 2005, during the condo building boom. An average share of 80% was registered during the 1980-2002 period. For the second quarter, there were just 7,000 multifamily condo construction starts. An elevated rental share of multifamily construction is holding typical apartment size below levels seen during the pre-Great Recession period. According to second quarter 2022 data, the average square footage of multifamily construction starts ticked down to 1,057. The median increased to 1,036 square feet. Related ‹ New Home Size Trends Reversing?Tags: economics, home building, housing, multifamily, multifamily built for rent, multifamily size

Jump for Multifamily Rental Development2022-08-22T08:30:11-05:00

Housing Starts Weaken in July

2022-08-16T09:21:54-05:00

A sharp decline in single-family home construction is another indicator that the housing slowdown is showing no signs of abating, as rising construction costs, elevated mortgage rates and supply chain disruptions continue to act as a drag on the market. Overall housing starts fell 9.6% to a seasonally adjusted annual rate of 1.45 million units in July, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The July reading of 1.45 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Single-family starts decreased 10.1% to a 916,000 seasonally adjusted annual rate and are down 2.1% on a year-to-date basis. This is the lowest reading for single-family home building since June 2020. More declines lie ahead, as single-family permits decreased 4.3% to a 928,000 unit rate and are down 5.9% on a year-to-date basis. NAHB is forecasting 2022 to be the first year since 2011 to record an annual decline in single-family home building. A housing recession is underway with builder sentiment falling for eight consecutive months, while the pace of single-family home building has declined for the last five months. The decline in single-family starts is reflected in the HMI measure of builder sentiment, as housing demand continues to weaken on higher interest rates while on the supply side builders continue to grapple with higher construction costs. Builders are reporting weakening traffic as housing affordability declines. The multifamily sector, which includes apartment buildings and condos, decreased 8.6% to an annualized 530,000 pace. Multifamily construction remains very strong given solid demand for rental housing. The number of multifamily 5+ units currently under construction is up 24.8% year-over-year. Multifamily development is being supported by a substitution effect, with frustrated or priced out prospective home buyers seeking rental housing. The number of single-family homes permitted but not started construction has likely peaked after rising over pervious quarters due to supply-chain issues. In July, there were 146,000 homes authorized but not started construction. This reading is flat year-over-year. In contrast, the number of multifamily 5+ units permitted but not started construction continues to rise, up 47% year-over-year to 147,000 units. On a regional and year-to-date basis, combined single-family and multifamily starts are 10.7% higher in the Northeast, 0.4% lower in the Midwest, 6.5% higher in the South and 2.2% lower in the West. Looking at regional permit data on a year-to-date basis, permits are 1.9% lower in the Northeast, 1.9% higher in the Midwest, 2.6% higher in the South and 0.2% higher in the West. As an indicator of the economic impact of housing and as a result of accelerating permits and starts in recent quarters, there are now 816,000 single-family homes under construction. This is 17% higher than a year ago. There are currently 862,000 apartments under construction, up 25% from a year ago with this number continuing to rise. Total housing units now under construction (single-family and multifamily combined) is 21% higher than a year ago. The number of single-family units in the construction pipeline is now falling and will continue to decline in the months ahead given recent declines in buyer traffic. Related ‹ Builder Confidence Falls for Eighth Consecutive MonthTags: economics, home building, housing, multifamily, starts

Housing Starts Weaken in July2022-08-16T09:21:54-05:00

Decline in Single-Family Permits in June 2022

2022-08-12T10:17:35-05:00

Over the first six months of 2022, the total number of single-family permits issued year-to-date (YTD) nationwide reached 567,798. On a year-over-year (YoY) basis, this is a 3.6% decline over the June 2021 level of 589,146. Year-to-date ending in June, single-family permits declined in all four regions. The South posted a small decline 0.8% while the Northeast region reported the steepest decline of 11.5%. The Midwest declined by 11.2% and the Western region reported a 4.6% decline in single-family permits during this time. Multifamily permits posted increases in all four regions. Permits were 32.3% higher in the Midwest, 22.9% higher in the South, 17.3% higher in the West, and 6.6% higher in the Northeast. Between June 2021 YTD and June 2022 YTD, 11 states saw growth in single-family permits issued. New Mexico recorded the highest growth rate during this time at 38.9% going from 3,061 permits to 4,252. Thirty-nine states and the District of Columbia reported a decline in single-family permits during this time with the District of Columbia posting the steepest decline of 22.7% going from 216 permits to 167. The ten states issuing the highest number of single-family permits combined accounted for 64.2% of the total single-family permits issued. Year-to-date, ending in June 2022, the total number of multifamily permits issued nationwide reached 331,934. This is 20.1% ahead over the June 2021 level of 276,433. Between June 2021 YTD and June 2022 YTD, 36 states and the District of Columbia recorded growth while 14 states recorded a decline in multifamily permits. Georgia led the way with a sharp rise (158.1%) in multifamily permits from 4,296 to 11,088 while Delaware had the largest decline of 74.5% from 667 to 170. The ten states issuing the highest number of multifamily permits combined accounted for 63.4% of the multifamily permits issued. At the local level, below are top ten metro areas that issued the highest number of single-family permits. For multifamily permits, below are the top ten local areas that issued the highest number of permits: Related ‹ Credit for Builders Less Available, Costs MoreTags: home building, multifamily, single-family, state and local markets, state permits

Decline in Single-Family Permits in June 20222022-08-12T10:17:35-05:00

Slowdown in Single-Family Permits in May 2022

2022-07-15T09:19:53-05:00

Over the first five months of 2022, the total number of single-family permits issued year-to-date (YTD) nationwide reached 473,997. On a year-over-year (YoY) basis, this is a 2.0% decline over the May 2021 level of 483,878. Year-to-date ending in May, single-family permits declined in three out of the four regions. The South posted a moderate increase of 1.0% while the Northeast region reported the steepest decline of 11.7%. The Midwest declined by 11.2% and the Western region reported a 2.2% decline in single-family permits during this time. Multifamily permits posted increases in all four regions. Permits were 39.3% higher in the Midwest, 20.2% higher in the South, 10.9% higher in the West, and 1.8% higher in the Northeast. Between May 2021 YTD and May 2022 YTD, 12 states saw growth in single-family permits issued. New Mexico recorded the highest growth rate during this time at 42.2% going from 2,502 permits to 3,558. Thirty-eight states and the District of Columbia reported a decline in single-family permits during this time with the District of Columbia posting the steepest decline of 25.5% going from 208 permits to 155. The ten states issuing the highest number of single-family permits combined accounted for 64.4% of the total single-family permits issued. Year-to-date, ending in May 2022, the total number of multifamily permits issued nationwide reached 265,751. This is 17.3% ahead over the May 2021 level of 226,634. Between May 2021 YTD and May 2022 YTD, 33 states recorded growth while 17 states and the District of Columbia recorded a decline in multifamily permits. Indiana led the way with a sharp rise (274.6%) in multifamily permits from 1,134 to 4,248 while Delaware had the largest decline of 81.4% from 649 to 121. The ten states issuing the highest number of multifamily permits combined accounted for 62.6% of the multifamily permits issued. At the local level, below are top ten metro areas that issued the highest number of single-family permits. For multifamily permits, below are the top ten local areas that issued the highest number of permits:   Related ‹ Since Pandemic Onset, Lumber Products Have Added $14K to House Price, $51 to RentTags: home building, multifamily, single-family, state and local markets, state permits

Slowdown in Single-Family Permits in May 20222022-07-15T09:19:53-05:00

Since Pandemic Onset, Lumber Products Have Added $14K to House Price, $51 to Rent

2022-07-14T14:21:38-05:00

Since the relatively low point at the onset of the pandemic on April 17, 2020, lumber prices have been volatile, with record setting spikes interspersed with periods of substantial declines. On balance over the entire period, however, softwood lumber prices have increased enough to add $14,345 to the price of an average new single-family home, and $5,511 to the market value of an average new multifamily home, according to NAHB’s latest estimates.  The increase in multifamily value, in turn, translates to households paying $51 a month more to rent the new apartment. In addition to narrowly defined framing lumber, these estimates include plywood, oriented OSB, particleboard, fiberboard, shakes and shingles—in short, any of the products sold by U.S. sawmills and tracked on a weekly basis by Random Lengths.  Estimates developed from the Builder Practices Survey conducted by Home Innovation Research Labs show that the average new single-family home uses more than 2,200 square feet of softwood plywood, and more than 6,800 of OSB, in addition to roughly 15,000 board feet of framing lumber. Builders do not in general buy lumber and other building products directly from sawmills, but from an intermediary like a lumber yard.  For that reason, NAHB estimates mark up sawmill prices by gross margin as a percent of sales for the “lumber and other construction materials” industry, as reported in the U.S. Census Bureau’s Annual Wholesale Trade Tables, Softwood lumber is also an input into certain manufactured products used in residential construction—especially cabinets, windows, doors and trusses.  To account for the manufacturer’s margin, sawmill prices for the lumber embodied in these products are marked up by the percent difference between receipts and cost of goods in the “wood product manufacturing” industry, as reported in the IRS Returns of Active Corporations tables. Taking all this into account, at the prices reported by Random Lengths on April 17, 2020, the total cost to a builder for softwood lumber was $16,927 for the products in an average single-family home, and $5,940 for the products in an average multifamily home. More recently, based on Random Lengths prices reported on July 01, 2022, the costs have risen to $29,407 for the softwood lumber products in an average single-family, and $10,734 for the products in an average multifamily, home.  These numbers represent a 74 percent ($12,480) and 81 percent ($4,795) increase in single-family and multifamily builders’ softwood lumber costs, respectively. Prices to home buyers go up somewhat more than this, due to factors such as interest on construction loans, brokers’ fees, and margins required to attract capital and get construction loans underwritten.  As explained in NAHB’s recent study on regulatory costs, for items used during the construction process, the final home price will increase by 14.94 percent above the builder’s cost. The bottom line is that the changes in softwood lumber prices that occurred between April 2020 and July 2022 have added $14,345 to the price of an average new single-family home and $5,511 to the market value of an average new multifamily home. Based on the average rent-to-value ratio in  most recent HUD/Census Rental Housing Finance Survey, the increase in builder cost and market value for a multifamily structure means tenants pay $51 more a month to rent the average new apartment due to the change in softwood lumber prices. This, along with rising wages for construction workers and higher interest rates, is one of the reasons the housing market is experiencing declining affordability Related ‹ Remodeling Market Declines Year-over-YearTags: Building Materials, building materials prices, economics, framing lumber, home building, house prices, housing, lumber, lumber prices, multifamily, osb, plywood, rent

Since Pandemic Onset, Lumber Products Have Added $14K to House Price, $51 to Rent2022-07-14T14:21:38-05:00

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