Residential construction continues to make its case for being a beacon for economic recovery as the pace of single-family starts in September was the highest production rate since the pre-crash summer of 2007.
Starts increased 8.5% to a 1.1 million seasonally adjusted rate, which was consistent with record levels of builder confidence during September and October coupled with low mortgage interest rates driving demand, particularly for suburban markets, and the growing number of houses under contract that have yet to break ground. Meanwhile the weakness in multifamily persists on weakening rental demand as starts there decreased 8% on a year-to-date basis.
However, builders continue to face challenges in terms of elevated lumber prices and supply chain shortages of other building materials. Material cost increases and shortages are having an impact on the construction pipeline. For August, the count of single-family homes that have an authorized permit but have not started construction totaled 104,000, a 22.4% increase compared to a year ago. Builders are reporting growing delays due to these supply-chain issues.
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