Housing Starts Surged in November To Its Highest Rate Since March

0
541

As the market continues to be challenged by lack of inventory, the U.S. Census Bureau and HUD reported This Week in Real Estate that housing starts surged in November to its highest rate since March and second highest rate in the past twelve months. Permits also performed well, reaching their highest rate since August, and for the fourth consecutive month the December National Association of Home Builders/Wells Fargo Housing Market Index, which measures builder confidence, increased to tie the highest reading of the year. Each metric on their own provides optimism around new inventory going into 2022. Below are a few newsworthy events from the second week of December that influence our business: 

Residential Construction Sails Into Holiday Season. Housing starts surged in November to the highest seasonally adjusted rate since March and the second highest in the last 12 months. The U.S. Census Bureau and the Department of Housing and Urban Development said the top-line residential construction numbers, both housing starts and permits, rose during the month and both outperformed analysts’ expectations. Housing starts were up 11.8 percent compared to October’s seasonally adjusted annual rate of 1.502 million units (revised from 1.520 million) to 1.679 million and were 8.3 percent higher than the rate in November 2020. Single-family starts rose 11.3 percent month-over-month to 1.173 million units, up from a revised (from 1.049 million) 1.054 million units in October. This was 0.8 percent lower than the prior November. For the year-to-date (YTD) there have been a total of 1.471 million housing starts, a 16.3 percent increase over the 1.265 million started in the first 11 months of last year. Single-family starts total 1.038 million and multifamily units 421,200. Over the same period last year those numbers were 900,700 and 352,000. Permits also performed well, increasing 3.6 percent from October to 1.712 million, the highest rate since August and maintaining a small (0.9 percent) edge over permitting in November 2020. Residential units were completed in November at an annual rate of 1.282 million units, 910,000 of which were single-family. Total completions were 4.1 percent higher than in October and up 3.1 percent from a year earlier while single-family completions were down fractionally from both earlier periods. 

Fed Will Aggressively Dial Back Its Bond Buying, Sees Three Rate Hikes Next Year. The Federal Reserve provided multiple indications Wednesday that its run of ultra-easy policy since the beginning of the Covid pandemic is coming to a close, making aggressive policy moves in response to rising inflation. For one, the central bank said it will accelerate the reduction of its monthly bond purchases. The Fed will be buying $60 billion of bonds each month starting in January, half the level prior to the November taper and $30 billion less than it had been buying in December. The Fed was tapering by $15 billion a month in November, doubled that in December, then will accelerate the reduction further come 2022. After that wraps up, in late winter or early spring, the central bank expects to start raising interest rates. Projections released Wednesday indicate that Fed officials see as many as three rate hikes coming in 2022, with two in the following year and two more in 2024. 

Builder Sentiment Strong At Year’s End. Despite inflation concerns and ongoing production bottlenecks, builder confidence edged higher for the fourth consecutive month on strong consumer demand and limited existing inventory. Builder sentiment in the market for newly built single-family homes moved one point higher to 84 in December, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). This ties the highest reading of the year that was posted in February. The most pressing issue for the housing sector remains lack of inventory. Building has increased but the industry faces constraints, namely cost/availability of materials, labor and lots. And while 2021 single-family starts are expected to end the year 24% higher than the pre-Covid 2019 level, we expect higher interest rates in 2022 will put a damper on housing affordability.

Did you know every home listed for sale with Berkshire Hathaway HomeServices Northwest Real Estate and Berkshire Hathaway HomeServices Real Estate Professionals are eligible to receive no-obligation home warranty coverage from American Home Shield or 2-10 Home Warranty the first six months the home is listed with our company?