The U.S. Census Bureau and US Department of Housing and Urban Development (HUD) issued their report on New Residential Construction for March 2011 showing a 5.7 percent increase in single-family home building permits from the month before, and a 7.7 percent increase in new home starts compared to the month before. This comes on the heels of new home construction sinking to a 25 year low last month.
The report shows the following new home construction activity for March 2011:
- Building permits issued for single-family residences were at an annual rate of 405,000 homes which is 5.7 percent above the prior month and a decrease of 25.3 percent from a year before.
- Housing starts for single-family residences were at an annual rate of 422,000 which is an increase of 7.7 percent from the prior month and a decrease of 21.1 percent from a year before.
- Homes completed were at a rate of 374,000 homes, a decrease of 22.2 percent from the prior month and a decrease of 23.5 percent from a year before.
As I say every month, we need to remember that all the numbers above are “seasonally adjusted” annual rates and the year over year comparisons are just comparing the numbers for the current month versus the a year before. Another way I like to look at where things stand is to simply look at the year to date data; actual numbers, not seasonally adjusted, compared to last years ytd numbers at this same time. I think this may give a little better comparison so those numbers are below:
- For 2011 there have been 91,300 permits issued for new homes compared with 115,700 this time year for a decrease of 21.1 percent.
- For 2011 there have been 89,900 new homes started compared with 114,300 this time last year for a decrease of 21.3 percent.
- For 2011 there have been 89,300 new homes completed compared with 98,300 this time last year for a decrease of 9.2 percent.
Let’s do one of my favorite things and look at the raw numbers and not seasonally-adjusted numbers to compare construction activity to sales:
- In the 12 month period through February 2011 (the most recent period sales data is available for) there were 275,000 new homes sold and there were 487,200 new homes completed, outpacing sales by 56.3 percent.
I realize that people such as Mike Castleman, CEO of Metrostudy, has been in the press a lot lately saying that we are headed to a new home shortage soon, and I don’t claim to know more than Mr. Castleman, but I would say that for as long as new home completions continue to outpace new home sales by large margins, we are not going to see this on a national level anytime soon. Having said that, I do think that there are going to be specific markets around the country that will have much more demand for new homes than others. Fortunately, given the fact that there are thousands of developed lots sitting around just waiting to be built on, and the average home can be constructed within a few months, when the demand does come I think builders should be able to respond quickly and keep up with the demand.