Every month around this time, the U.S. Census Bureau releases new data that gives us a glimpse into what’s going on in the housing market, specifically with new housing construction.
Wednesday we learned that housing starts and building permits were higher in June than they were in May, but lower than a year ago. And housing completions — the number of new single-family homes and multifamily buildings that are done — went way up, both month over month and year over year.
“The reason really is that there is so much stuff that was just in the pipeline,” said Chen Zhao, an economics research lead at Redfin. She said construction on much of this housing that’s coming online started a while ago.
“There was a kind of a big building boom coming out of the pandemic, because there was so much demand for housing, so builders were trying to keep up with that demand,” Zhao said. But it was taking them a long time to build, “because the cost of supplies was high, there was a shortage of supplies, and there was a shortage of construction labor.”
That log jam is still clearing.
Logan Mohtashami, lead analyst at HousingWire, said all the new housing that’s been completed lately, especially on the multifamily side, has been good for the economy.
“The best way to deal with inflation is supply, right?” he said. “You want to build as much as you can and get those homes out there for people to live in and bring down the rise of rents.”
That is finally happening.
“But I think we may be sort of at peak,” said Lisa Sturtevant, chief economist at Bright MLS. She said if you look at recent trends in permits and starts, “we’re actually starting to see a slowdown, particularly on the multifamily side, when it comes to the number of new units that are kind of in the pipeline,” Sturtevant said.
But Orphe Divounguy, a senior economist at Zillow, said that could shift again soon.
“If you look ahead, you see inflation cooling, and the cooldown in inflation will likely lead to mortgage rates easing somewhat,” Divounguy.
That will likely increase demand and be an incentive for builders to start building more again.
Divounguy said that would be a good thing for affordability, which has become much worse in the last few years.
“The solution, the long-term solution, is to continue to build housing. We saw it in the multifamily space, where basically, as we built a bunch of apartments, rent growth slowed,” Divounguy said.
That’s what needs to happen with single family homes, he said.
