Housing Starts (Mar.) - Capital Economics
US Housing

Housing Starts (Mar.)

US Housing Market Data Response
Written by Matthew Pointon
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Homebuilding recovered quickly from February’s adverse weather, with single-family starts rising to close to a 15-year high. If it were not for constraints on production, including soaring lumber prices, starts would have been even higher. Indeed, a large backlog of homes which have been authorised but not started will support single-family construction this year, helping starts average 1.16m annualised.

Starts bounce back after winter storms

  • Homebuilding recovered quickly from February’s adverse weather, with single-family starts rising to close to a 15-year high. If it were not for constraints on production, including soaring lumber prices, starts would have been even higher. Indeed, a large backlog of homes which have been authorised but not started will support single-family construction this year, helping starts average 1.16m annualised.
  • Following winter storms in February, which shut down some construction activity, housing starts rebounded in March. Total starts increased 19.4% m/m, with a solid gain of 15.3% m/m in single-family starts, and a rise of 30.8% m/m in the volatile multifamily sector. Total starts were up 37% y/y but, given the shutdown of the economy in March of last year, annual comparisons will be inflated by favourable base effects.
  • Building permits also had a good month. Single-family permits increased 4.6% m/m and have now been above 1 million annualised in every month since August of last year. Strong new home demand, helped by the record low number of existing homes for sale, is boosting homebuilder confidence and leading to more permit applications. Indeed, single-family starts look low compared to the number of permits previously issued.
  • One factor delaying starts are record high lumber prices. Soaring demand for home renovation projects, driven by cash-rich households with lots of spare time and a need for more space, have kept prices above $1,000 per 1,000 sq.ft. since mid-February. Some developers have therefore held back on projects on the expectation that prices will soon fall back. The number of homes authorised but not started surged to a 14-year high of 130,000 in March. (See Chart 1.)
  • But even if lumber prices stay elevated, developers will eventually have to start building. We therefore anticipate single-family starts will average 1.16m annualised this year, up 16% compared to last year.

Chart 1: Single-Family Homes Authorised Not Started & Lumber Price

Sources: Refinitiv, Census Bureau

Table 1: Housing Starts & Building Permits (000s Annualised)

Mar-20

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan-21

Feb

Mar

Housing Starts

1269

934

1038

1265

1487

1373

1437

1530

1553

1670

1642

1457

1739

Building Permits

1356

1066

1216

1258

1483

1476

1545

1544

1635

1704

1886

1720

1766

Source: Census Bureau


Matthew Pointon, Senior Property Economist, matthew.pointon@capitaleconomics.com