Last month, housing starts fell 1.6%, which is only a slight drop, but permits are down 7.7%, and the gap between units completed and those still in progress. construction is the largest on record, according to reports from the US Department of Commerce.
As housing starts and permits hit their lowest levels in a year and with labor shortages, supply chain issues and rising commodity prices, it should be noted that Single-family housing starts have in fact remained unchanged and permits for single-family homes have only declined by 0.9%, so what we see here is a slowdown in the multi-family sector as sales ramp up in the multi-family sector. single-family homes.
Another factor at play here regarding still tight inventory levels is the federal mortgage forbearance program in response to the pandemic. At the end of the program, other stocks will be put online.
Dr Lawrence Yun, chief economist at the National Association of Realtors (NAR) explains, âThe current default rate for mortgages of at least three months is 3.5%, down from less than 1% before the pandemic. However, foreclosures have hit all-time lows so far due to forbearance support. The default rate will certainly drop as long as the economy continues to generate jobs, but the end of the federal support program inevitably means some homeowners will have to sell. This will be another source of housing inventory.
As tight inventory levels have kept the market tight and sales below demand, the residential real estate industry should see hope in this analysis.
But there is no sector that is immune to the supply chain crisis or rising prices. again on raw materials. Reuters reports that many materials like windows and circuit breakers are in short supply as the cost of building materials has risen, such as copper which has risen 16%, and lumber prices rise to record highs. records set in May.
Homebuilders’ confidence is on the rise, according to the National Association of Home Builders (NAHB), but their most recent survey also indicates that “builders continue to face ongoing supply chain disruptions and labor that delay completion times “.
The Mortgage Bankers Association (MBA) today reported that mortgage applications for the purchase of new homes were down 16.2% from September 2020, and applications were down 4% from to August. It should be noted that the average loan amount reached $ 408,522, the highest on record, and another indicator of rising construction costs.
Looking ahead, analysts expect the housing starts backlog to continue as labor and supply chain issues persist. And while the news isn’t overtly positive, single-family homes alone are doing better than in 2020. There is light at the end of the tunnel for hopeful buyers.