Single Family Housing Starts Crash as Bidenflation Sends Costs Soaring

U.S. homebuilders broke ground on fewer new single-family homes in December compared with the prior month, data from the Census Bureau and the Department of Housing and Urban Development showed Wednesday.

The seasonally adjusted annual rate for single-family housing starts fell to 1.172 million units, down 2.3 percent from November. Compared with a year ago, single-family starts are down 10.9 percent.

The U.S. housing market has been roiled by the pandemic as housing preferences shifted for millions of Americans from urban living to suburban. High demand for single-family houses has pushed prices up relentlessly. The most recent data available shows that the median price of a new home was up 19 percent in November compared with a year earlier. The inventory of new homes for sale was at a historic low. The total number of homes sold fell 14 percent compared with November of 2020.

But rising prices of materials and labor are holding back builders from meeting the demand. The price of softwood lumber jumped 24 percent in December, according to the Department of Labor’s Producer Price Index. This was the third consecutive month of rapidly rising softwood lumber prices after the market bottomed in the summer following an earlier surge. Compared with a year ago, prices are up 12.6 percent.

Materials for construction generally rose 1.9 percent in December compared with the prior month and are up 14.8 percent compared with a year ago. Components for construction, manufactured items used in construction, saw prices rise 1.3 percent in December and are up 28 percent compared with a year earlier.

Builders paid 0.3 percent more for services they purchased in December compared with November, for an annual increase of 11.7 percent. The average hourly wage for construction employees rose 0.4 percent in December and is up 4.6 percent compared with a year ago.

Construction of multifamily homes jumped 13.7 percent in December to a seasonally adjusted annualized rate of 524,000.  Compared with a year ago, apartment construction is up 56 percent.

The combined number of starts rose 1.4 percent to a seasonally adjusted annualized rate of 1.702 million, beating expectations for a drip to 1.650 million. The prior month was revised down slightly from 1.698 million units to 1.697 million.

Permits, which are a forward-looking indicator of plans to build homes, unexpectedly soared in December by 9.7 percent to a seasonally adjusted annualized rate of 1.873 million from an upwardly revised 1.717 million in November. Compared with a year ago, permit activity is up 6.5 percent. Single-family starts rose two percent in December gut are down 8.5 percent compared with December 2020. Permits for projects for five units or more jumped 19.9 percent and are up 41.8 percent compared with a year ago.

The surge in multifamily construction may provide some relief to tenants facing unusually large rent hikes as cities and states lift restrictions on evictions and other measures that held back rents last year.