The monthly New Residential Construction report was recently released for the month of August. Within this report there are three categories; Building Permits, Housing Starts and Housing Completions.
Permits, which are a good indicator of the future of new construction, rose by 6% for the month and rose 13.5% year over year at 1.728 million units. Single-family permits only rose only by 0.6% for the month.
Housing Starts, which measure the “breaking of ground”, rose 3.9% for the month and 17.4% year over year at 1.615 million units. But this is a great example of having to look past the headlines. This includes both multi-family and single-family homes. When looking at just single-family housing starts, they actually had a monthly decrease of 2.8%. With an under supply of housing inventory of close to 4.5 million homes, this doesn’t help much and doesn’t bode well for buyers of single-family homes.
Housing Completions or the completed construction projects had a monthly decrease of 4.5% and an annual increase of 9.4% at 1.392 million units. Single-family completions increased in August by 2.8%.
An interesting part of this report was that homes that were permitted that have not been started yet are up 50% from last year! There is certainly a huge backlog of homes that are ready to be created, but have not even begun to be built.
Again, we have to look past the headlines. This report appears strong, but when looking deeper we really need more single-family homes to hit the market to sop up the demand for them. With the current dynamic of the market, strong demand and tight inventory, we will likely continue to see home values continue to appreciate.