Housing Starts, Builder Confidence Down

By Kelly Leighton | Aug. 30, 2021 | 2 min. read

Higher material costs, labor shortages and supply issues are causing headaches for the homebuilding industry.

According to the National Association of Home Builders, housing starts are down 7% to a rate of 1.53 million units. Single-family housing starts decreased 4.5%, to 1.11 million, while multifamily starts are down 13.1% to 423,000 units. However, overall permits did increase 2.6%, with multifamily permits up 11.2% and home starts are up from a year ago.

But with housing demand high, and home starts lower, it’s no surprise then that builder confidence is at its lowest level in 13 months. Their confidence index dropped five points from July, reaching 75. Buyer traffic and current sales condition are negatively impacting builders, the survey found. With supply issues continuing to plague the industry, the higher prices of things like lumber and appliances are being passed on to homebuyers. Buyers are skipping seeing newly built homes due to the price increase, leading to lower buyer traffic and thus, weaker sales conditions. New home sales were up only 1% in July.

However, builders are remaining optimistic of upcoming sales expectations for the next six months, anticipating they will be stable.

“While the demographics and interest for homebuying remain solid, higher costs and material access issues have resulted in lower levels of home building and even put a hold on some new home sales,” said NAHB Chief Economist Robert Dietz. “While these supply-side limitations are holding back the market, our expectation is that production bottlenecks should ease over the coming months and the market should return to more normal conditions.”

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