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‘Strong Wave of Buyer Demand’ Drives Rising Residential Construction

The U.S. Census Bureau released its construction statistics for September, recording a 1.9% increase in housing starts compared to August. Single-family residential starts rose 8.5% over the month to 1.1 million annualized units, a level not seen since 2007.

Realtor.com's Chief Economist George George Ratiu credits "record-high builder optimism" and a "strong wave of buyer demand" for the increasing numbers of permits, starts and completions seen in September.

He adds that "homebuilders must balance the need to address an acute shortage of housing with the increasing costs of labor, materials and land."

Fannie Mae Economist Doug Duncan attributed that strong demand to "low interest rates, a tight supply of existing homes for sale, and a trend in some metro areas toward purchasing homes in suburban areas."

Here are more details culled from the bureau's report. (Full report: Monthly New Residential Construction)

  • Privately-owned housing units authorized by building permits in September were at a seasonally adjusted annual rate of 1,553,000. This is 5.2% above the revised August rate of 1,476,000 and is 8.1% above the September 2019 rate of 1,437,000. Single-family authorizations in September were at a rate of 1,119,000; this is 7.8% above the revised August figure of 1,038,000.
  • Starts—Privately-owned housing starts in September were at a seasonally adjusted annual rate of 1,415,000. This is 1.9% above the revised August estimate of 1,388,000 and is 11.1% above the September 2019 rate of 1,274,000. Single-family housing starts in September were at a rate of 1,108,000; this is 8.5% above the revised August figure of 1,021,000. The September rate for units in buildings with five units or more was 295,000.
  • Completions—Privately-owned housing completions in September were at a seasonally adjusted annual rate of 1,413,000. This is
    15.3% above the revised August estimate of 1,226,000 and is 25.8% above the September 2019 rate of 1,123,000. Single-family housing completions in September were at a rate of 921,000; this is 2.1% above the revised August rate of 902,000.

Raitu added that, "The real estate market is unseasonably active for this late in the year, as buyers are still playing catch-up from the spring lockdown. With mortgage rates at new lows, many home shoppers are actively pursuing a home for the new environment of live, work, school, play and exercise under one roof. The search is translating into multiple bid offers in suburbs across the country, where greener backyards, larger homes and access to the outdoors are beckoning young professionals and families alike. The good news is that builders are already present in these neighborhoods, and in a good position to respond to shifting consumer preferences. However, a significant volume of new homes is needed to redress the existing imbalance between supply and demand, and tame the sharp jump in prices."

Austin Niemiec, Executive Vice President of Rocket Pro TPO, added that, "With historically low rates dominating our industry and keeping demand high for both refi and purchase loans, it is important for independent mortgage brokers to continue working with homebuyers and referral sources to maintain a steady flow of clients.”

Duncan went on to further discuss the issues of supply shortages. "This strong sales pace, he said, "has gotten ahead of available units. Prior data released from the Census Bureau showed that, in August, the month's supply of available new homes for sale at the current sales pace hit a record low, indicating that homebuilders will have to continue to accelerate their construction pace if they are to meet demand.
"Adding to the building pressure is that during the spring COVID-19-related lockdowns and supply chain disruptions, much construction activity was disrupted. This is still being reflected in the comparatively modest increase of homes completed in recent months, which remains below the February pre-COVID-19 peak. In contrast, we believe the same dynamics helping to drive demand for single-family homes will likely continue to have an opposite effect on multifamily demand, putting downward pressure on construction activity in the urban regions of some metros areas.”

About Author: Christina Hughes Babb

Christina Hughes Babb is a reporter for DS News and MReport. A graduate of Southern Methodist University, she has been a reporter, editor, and publisher in the Dallas area for more than 15 years. During her 10 years at Advocate Media/Dallas Magazine, she published thousands of articles covering local politics, real estate, development, crime, the arts, entertainment, and human interest, among other topics. She has won two national Mayborn School of Journalism Ten Spurs awards for nonfiction, and has penned pieces for Texas Monthly, Salon.com, Dallas Observer, Edible, and the Dallas Morning news, among others.
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