New-Home Construction Activity Increases Following a Surge in Building Permits
December 2021 housing starts were up 2.5% year-over-year at a seasonally-adjusted annual rate of 1.7 million, while permitting saw a 6.5% year-over-year gain, according to Realtor.com. Before seasonal adjustments, the total number of single-family homes completed throughout 2021 was the highest since 2007, and permitting activity has remained strong into the new year.
The initial rise in permitting was caused by a 112% increase in the number of authorized housing structures in the Northeast, though the Midwest also reported a 22% gain in permitting activity. As interest rates rise at the start of 2022, economists predict that momentum could cool, though high demand will push home building to a healthy level throughout the year.
December’s surge in housing permits may be an outlier, but permitting activity has remained strong in recent months. That’s created a larger backlog of construction projects for home builders, as construction firms continue to grapple with shortages of both supplies and labor.
Indeed, the number of housing units that construction companies haven’t started work on despite having the authorization to begin building is up 44% from a year ago and rose on a monthly basis. This will give builders plenty of runway to continue construction work in 2022, which should infuse the housing market with much-needed inventory.