Single-family housing starts ended 2020 on a high note, rising 12% in December to a 1.338 million unit pace – the highest pace since 2006, according to the Census Bureau.
That’s up 27.8% from one year ago, a remarkable figure given the economic effects of the COVID-19 pandemic, per industry officials.
“2020 will go down, quite unexpectedly, as one of the best years for home builders in recent memory, and proof that great challenges — and not just those posed by COVID — can be overcome with hard work and creativity,” said Matthew Speakman, Zillow economist. “Demand for homes remains sky high, despite the still-raging pandemic, as people look to take advantage of historically low mortgage rates and find their next home. “
December housing rates hit 1,338,000 — up from November’s equally-impressive number of 1,195,000. The December rate for units in buildings with five units or more was 312,000.
An estimated 1.380 million housing units were started in 2020 – 7% percent above the 2019 figure of 1.29 million
Remarkably, most industry experts believe construction rates will climb even higher in 2021.
“We expect single-family construction to move up 9% in 2021 — a much-needed relief valve for homebuyers,” said Danielle Hale, chief economist at Realtor.com. “While buyer demand has slowed since December, it remains notably higher than one year ago, giving builders a strong incentive to keep building.”
Hale added that builder optimism is higher than it was one year ago, but rising material costs and low land inventory are weighing on builder confidence in the short term.
“Supply-side headwinds will remain in 2021,” added Odeta Kushi, First American deputy chief economist. “Given the underbuilding that took place in the decade following the Great Recession, it will take years for builders to close the deficit.”
Even with the promise of additional relief funding from President Joe Biden’s American Rescue Plan, most homebuyers are still looking for houses with large work-from-home areas — a sign that confidence in the eradication of the virus, and a restart of face-to-face interaction, remains low.
“The past year has also cemented the smooth transition towards touring homes virtually and digitalizing many parts of the mortgage process, making homebuying much safer in light of the ongoing public health situation,” said John Pataky, executive vice president at TIAA Bank.
Privately-owned housing starts in December also jumped from November — a 5.8% rise with a seasonally adjusted annual rate of 1.669 million. That’s also 5.2% above the December 2019 rate of 1.587 million
Austin Niemiec, Rocket Pro TPO executive vice president, urged brokers to maintain a focus on purchasing and ensuring solid internal processes.
“Brokers should be ready to support clients looking to secure their dream home,” he said. “This will be another strong year for loan officers, and new houses will play an important role in making sure we assist buyers at a high level.”
In authorizations, units in buildings with five units or more were authorized at a rate of 437,000 in December. Privately owned housing units authorized by building permits in December were at a seasonally adjusted annual rate of 1,709,000 — 4.5% above the revised November rate of 1.635 million.
Single-family authorizations in December were at a rate
of 1.226 million, a rise of 7.8% above the November figure of 1.137 million.
Lawrence Yun, National Association of Realtors chief economist, is optimistic the housing sector will be a major player in the economy’s recovery in 2021.
“More construction also means more local job creation,” he said. “The worst of the housing shortage could soon come to an end.”