Single-family Construction Normalizing Even as Starts Edge Lower in August

Strong multifamily production helped push overall housing starts up in August as single-family starts edged lower due to ongoing supply chain issues and labor challenges. Total starts increased 3.9 percent to a seasonally adjusted annual rate of 1.62 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The August reading of 1.62 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts decreased 2.8 percent to a 1.08 million seasonally adjusted annual rate, but are up 23.8 percent year-to-date. The multifamily sector, which includes apartment buildings and condos, increased 20.6 percent to a 539,000 pace.

"Single-family construction is normalizing at more sustainable levels after an increase in building material pricing," says Chuck Fowke, chairman of the National Association of Home Builders. "Demand remains strong, but the market is facing increasing housing affordability issues after a run-up in new and existing home prices. Multifamily construction increased in August, with NAHB expecting a solid gain for apartment construction in 2021 after a slight decline last year."

"More inventory is coming for a market that continues to face a housing deficit," says Robert Dietz, NAHB chief economist. "The number of single-family homes under construction in August-702,000-is the highest since the Great Recession and is 32.7 percent higher than a year ago. While some building materials, like lumber, have seen easing prices, delivery delays and a lack of skilled labor and building lots continue to hold the market back."

Overall permits increased 6 percent to a 1.73 million unit annualized rate in August. Single-family permits increased 0.6 percent to a 1.05 million unit rate. Multifamily permits increased 15.8 percent to a 674,000 pace.

Single-family units permitted but not started are up 50 percent from a year ago, a sign of persistent supply-chain issues.