Implications: Housing construction came roaring back in March following the large, but temporary, disruption from February's severe winter weather. The 19.4% gain in housing starts puts them at the highest level since 2006 and the gains were broad-based, with every region outside the West and both single-family and multi-family construction posting increases. Not every month is going to be this strong, but we expect housing starts to remain in an upward trend. Why the confidence? Building permits for future construction remain near the highest level since 2006. Moreover, permits have now outpaced new construction for eight consecutive months. This has resulted in a backlog of projects that have been authorized but not yet started, which is now the largest in nearly 15 years. As we mentioned in this week's Monday Morning Outlook, there has been a long running deficit in new home construction. The US needs roughly 1.5 million housing starts a year based on population growth and scrappage (voluntary knockdowns, natural disasters, etc.), but we haven't built that many new homes in any calendar year since 2006. Now, with plenty of future building activity in the pipeline and builders looking to boost the inventory of homes as well as meet consumer demand, it looks likely that construction in 2021 will surpass the 1.5 million unit benchmark. This positive outlook is reinforced by yesterday's read on the NAHB index, a gauge of homebuilder sentiment, which rose to a reading of 83 in April from 82 in March. The gain was driven by strong consumer demand for homes offsetting rising materials costs, especially lumber, another signal of ongoing inflationary pressure as the US begins to reopen.
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Posted on Friday, April 16, 2021 @ 11:01 AM
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