Breaking News
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Labor, building material shortages depress U.S. single-family housing starts

Economic IndicatorsSep 21, 2021 02:06PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. FILE PHOTO: A carpenter works on building new townhomes that are still under construction while building material supplies are in high demand in Tampa, Florida, U.S., May 5, 2021. REUTERS/Octavio Jones

By Lucia Mutikani

WASHINGTON (Reuters) - U.S. single-family homebuilding fell for a second straight month in August as builders continued to struggle with shortages of materials and labor, suggesting the housing market could remain a drag on economic growth in the third quarter.

The report from the Commerce Department on Tuesday also showed the number of houses authorized for construction but not yet started raced to a record high last month, a sign of reluctance by builders to take on new projects.

Builders' inability to ramp up the production of single-family homes amid a massive housing shortage is driving up prices and keeping some first-time buyers from the market.

"While lumber prices have plummeted in the spot market, those lower prices have not yet made their way to home builders," said Mark Vitner, a senior economist at Wells Fargo (NYSE:WFC) in Charlotte, North Carolina. "Moreover, other essential building materials remain in short supply, including windows, cabinets, electric breaker boxes and wedge anchors."

Single-family starts, which account for the largest share of the housing market, dropped 2.8% to a seasonally adjusted annual rate of 1.076 million units last month. The decline was, however, offset by a surge in starts for the volatile multi-family segment.

As a result, overall housing starts advanced 3.9% to a rate of 1.615 million units in August. Data for July was revised up to a rate of 1.554 million units from the previously reported 1.534 million units. Economists polled by Reuters had forecast starts would rebound to a rate of 1.555 million units. Housing starts jumped 17.4% compared to August 2020.

Single-family starts dropped in the West and Midwest. They rose in the Northeast and the densely populated South.

Building costs remain an issue even though lumber futures have tumbled from a record high of $1,711 per thousand board feet in May to about $604 in Tuesday morning trade.

Single-family homebuilding has struggled to gain traction since surging to a rate of 1.255 million units in March, which was the highest level since November 2006.

Starts for buildings with five units or more soared 21.6% to a rate of 530,000 units last month, the highest level since January 2020. The multi-family housing segment is being boosted by demand for rentals as COVID-19 vaccinations allow companies to recall workers to offices in city centers.

Early in the coronavirus pandemic, there was an exodus from cities as people worked from home and took classes online, fueling demand for bigger homes in the suburbs and other low-density areas. While the pandemic tailwind is fading, demand for housing remains strong thanks to near record low mortgage rates and rising wages from a tightening labor market.

Though the Federal Reserve is expected at the end of a two-day policy meeting on Wednesday to clear the way to trimming its monthly bond purchases later this year, that will likely have a limited impact on mortgage rates. The U.S. central is expected to keep its benchmark overnight interest rate near zero for a while.

A survey from the National Association of Home Builders on Monday showed confidence among single-family homebuilders edged up from a 13-month low in September, but it noted that "delivery times remain extended and the chronic construction labor shortage is expected to persist."

Stocks on Wall Street rose as investors weighed the risk of contagion from debt-saddled Chinese developer Evergrande. The dollar dipped against a basket of currencies. U.S. Treasury prices were mixed.

(Graphic: Housing starts,


Residential investment contracted in the second quarter after three straight quarters of double-digit growth. A further decline this quarter is likely.

"The softness in single-family starts suggests somewhat lower residential investment," said Blerina Uruci, an economist at Barclays (LON:BARC) in Washington.

Permits for future homebuilding rose 6.0% to a rate of 1.728 million units in August. Single-family permits gained 0.6% to a rate of 1.054 million units. Permits for buildings with five units or more jumped 19.7% to a rate of 632,000 units, the highest level since January 1990.

"We conjecture that this strength in multi-family may be a response to the strong increase in asking rents and the low vacancy rates in rental units," said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.

The backlog of homes yet to be started increased 3.7% to 251,000 units, a record high. Single-family homes yet to be started were near a 15-year high.

Housing completions fell 4.5% to a rate of 1.330 million units last month. Single-family home completions rose 2.8% to a rate of 971,000 units. The pandemic has lengthened the time from when a permit is issued for single-family home construction to completion, which economists blame on supply constraints.

The inventory of previously owned homes is near record lows, leading to record double-digit annual growth in home prices.

Realtors estimate that single-family housing starts and completion rates need to be in a range of 1.5 million to 1.6 million units per month to close the inventory gap.

The stock of housing under construction increased 1.7% to a rate of 1.404 million units last month.

"Supply issues will constrain production for some time yet and we expect single-family starts will see only a gradual rise from here, reaching 1.16 million annualized by end-2021," said Matthew Pointon, a senior property economist at Capital Economics in New York.

Labor, building material shortages depress U.S. single-family housing starts

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email