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Residential Construction Witnesses Rebound

Monday, October 18, 2021

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In a report regarding new residential construction statistics, the U.S. Census Bureau and the U.S. Department of Housing and Urban Development revealed that the industry recently witnessed a rebound in home construction.

According to the report, residential construction in August showed a seasonally adjusted annual rate of 1.62 million units, 17.4% above the pace of a year ago. The rebound is mostly attributed to a 21.6% jump in construction of apartment units, which was reported to have offset a 2.8% fall in single-family construction.

“Higher input costs and shortages remain headwinds for builders. But still-low inventories should be a positive for activity as these constraints ease,” said Rubeela Farooqi, Chief U.S. Economist for High Frequency Economics.

Another sign that residential construction could stay on the rise, the report suggests, is that applications for building permits saw a 6% increase, reaching a seasonally adjusted annual rate of 1.73 million units. Construction was also reported to be up across the nation, except in Western states.

© iStock.com / ArtBoyMB

In a report regarding new residential construction statistics, the U.S. Census Bureau and the U.S. Department of Housing and Urban Development revealed that the industry recently witnessed a rebound in home construction.

In a separate survey conducted by the National Association of Home Builders and Wells Fargo, sentiment revealed a slight increase to 76 in September. Although the slight increase ends a three-month-long decrease, the index remains far below the record reading of 90 last November.

“The single-family housing market has moved off the unsustainably hot pace of construction of last fall and has reached a still hot but more stable level of activity,” said Robert Dietz, Chief Economist for NAHB.

Other reports issued by the NAHB revealed an increase in residential remodeling. For the third quarter, NHAB’s Royal Building Products Remodeling Market Index posted a reading of 87, up five points from the third quarter in 2020.

“Demand for remodeling remains strong, and remodelers are doing quite well as long as they can adequately deal with material and labor shortages,” said NAHB Remodelers Chair Steve Cunningham, CAPS, CGP, a remodeler from Williamsburg, Virginia. “So far, a substantial share of their customers have been willing and able to tolerate the extra cost and delays of requested remodeling projects.”

Last month, NHAB reported in its quarterly Home Building Geography Index that there was a continued shift of residential construction within suburban and lower-cost market areas. The trend was noted to be especially pronounced within the multifamily sector.

A quarterly measurement of building conditions across the country, the HBGI uses county-level information about single- and multifamily permits to gauge housing construction growth throughout various submarkets.

New this year, the NAHB updated the HBGI to include a new segmentation of the housing market based on measures of housing affordability using the ratio of the median value of all owner-occupied housing units by county, relative to the median income of all residents in that county, as reported in the 2019 five-year American Community Survey in its second-quarter report for 2021.

Total population for the least-affordable counties was reportedly to be 161 million (49.9% of the total U.S. population), while the total population for the most-affordable counties was reported to be 9 million (2.8% of the total U.S. population).

The report also revealed that single-family home building experienced a shift toward more affordable markets, although the shift was not as pronounced as multifamily construction. Exurbs and outer suburbs of medium-sized cities accounted for 18.1% of single-family construction in the second quarter—a market share gain of 0.8 percentage points since the fourth quarter of 2019.

At the beginning of the month, the Associated General Contractors of America also weighed in on ongoing residential work, reporting that while construction spending stalled over the summer as a result of decreased nonresidential projects, residential work was on the rise.

“Nearly every nonresidential spending segment has deteriorated from already inadequate 2020 levels in the first two-thirds of this year,” said Ken Simonson, the association’s Chief Economist. “Meanwhile, soaring materials costs mean that fixed public budgets buy even less infrastructure than before.”

According to AGC, for the month of August, residential construction segment climbed 0.4% for the month and 26% year-to-date.

Spending, Supply Chain Issues, Next Steps

In September, construction employment also rose, with the U.S. Department of Labor’s Bureau of Labor Statistics reporting that firms hired 22,000 new employees.

In addition, the report also revealed that construction’s jobless rate of 4.5% had slightly improved from the previous month’s 4.6% figure. Despite the increase in workers, however, the industry has yet to reach pre-pandemic levels and currently sits 201,000 employees below its February 2020 numbers.

Since the early stages of the pandemic, the Associated Builders and Contractors reports that the nonresidential construction industry has recovered 81.9% (912,000) of its jobs.

Nonresidential construction employment increased by 18,600 positions on net, with all three subcategories showing gains for September, while nonresidential specialty trade contractors added 11,400 jobs and nonresidential building and heavy and civil engineering employment rose by 4,100 and 3,100 positions, respectively.

In the residential sector—which includes building contractors, homebuilders and residential specialty trades—employment witnessed the addition of 3,600 workers over the course of the same month.

The AGC also weighed in on the recent report, noting that nonresidential construction has been affected by the widespread supply chain problems, which are causing owners already uncertain about future demand for commercial space to delay or even cancel some projects.

Again, the association has tried to urge the Biden administration to remove tariffs and import quotas on a range of key construction materials to help address ongoing supply chain disruptions.

Most recently, earlier this month, the NAHB also called on President Biden to take the following actions:

  • Redouble its efforts to address lumber price volatility, which has seen cash prices climb by more than 25% over the past month;
  • Address supply chain bottlenecks for lumber and other building materials and supplies that are causing significant delays and keeping home prices about 20% higher than they were a year ago; and
  • Return to the negotiating table with Canada and develop a new softwood lumber agreement that will end tariffs on lumber shipments into the United States.

NAHB’s letter stated that these are “three key issues that continue to trouble our members, each extremely problematic but when combined, will severely hamper the ability to provide affordable housing and provide jobs to strengthen the economy.”

   

Tagged categories: Associated General Contractors (AGC); Condominiums/High-Rise Residential; Economy; Home builders; Maintenance + Renovation; Market; Market data; NA; National Association of Home Builders (NAHB); North America; Projects - Commercial; Residential; Residential Construction; Residential contractors

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