By: Charles C. Shinn Jr., PhD
President, Builder Partnerships
Total Building permits issued by the end of October were 20.0% ahead of those issued in 2020. Single family permits recorded a 17.3% increase, and multi-family permits registered an increase of 25.7%. Total housing starts for 2021 by the end of October had increased 17.0% over the same period in 2020 which consisted of a 16.7% rise in single family starts and an 17.8% growth in multi-family starts. Multi-family housing activity has remained surprisingly strong with most of the activity in suburban and southern city markets. Apartment vacancies are very low (5.0%) and rental rates are increasing.
Existing home sales have been very strong this year, registering a seasonally-adjusted annual rate of 6.34 million which is the 9th month this exceeded the 6 million rate. Since last October, the median sales price for existing homes increased 13.1% to $353,900 and the inventory of unsold homes decreased by 12% with only 2.4 months of supply. Existing homes typically stayed on the market for only 18 days with 82% of the homes sold within a month.
New home sales as of the end of October were trailing last year by 4.4% as builders have been constraining sales in an effort to reduce their backlogs and to reduce their exposure to inflationary cost increases and extended construction schedules due to supply chain issues. Builders have been aggressively increasing their sales prices to slow down sales with a 17.5% escalation of the median sales price since last October to $407,700. Over the year, the inventory of new homes has increased from 3.5 month to 6.3 months. Only 9.3% of the inventory is completely ready to deliver homes which is only about 20 days of homes available for sale. Ninety percent of the inventory has either not been started or is under construction.
Interest rates have been gradually increasing over the last several months, with the rate on a 30-year fixed rate mortgage loan in October at 3.07%. The chairman of the FED finally acknowledged that inflation is now at 6.8% and growing (and not transitory) and will finally begin to take action to counter what could be a rather long-term inflationary period. These counter measures will raise mortgage interest rates which could cause psychological and affordability issues for the already frustrated home buyer.
The housing industry will end 2021 and enter 2022 very strong and be a bright spot in the economy. Builders will have large backlogs of sales and homes under construction. The number of available existing and new homes for sale is very tight, so builders and sellers will have pricing strength which builders will need to cover the 10% plus increase in inflationary costs they will experience. There is a very strong housing need during this decade but the effective housing demand will be impacted by the general economic environment.
Updated: December 30, 2021
(November 2021 Data)
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