May 2021 New Residential Construction – Census Bureau

May 2021 U.S. Census Bureau new residential construction shows a 1.6% decrease in single family permits month over month but a large increase in permits year over year suggesting that we are moving away from the pandemic lows but also that the hot housing market may be beginning to cool off. We see multi-family construction permits down 7.7% month over month and up only 10% from May 2020. The number of single family homes authorized but not started increased by 3.6% to a one year high. However, the number of multi-family homes authorized but not started decreased by 4.1%. 

Single family starts are up 3.6% from last month and up 50.3% from this time last year. Multi-family starts are also up 4.0% from last month and up 52.5% from this time last year. The number of single family homes under construction has increased by 1.2% from last month while multi-family homes decreased by 0.3%, however multi-family construction has largely held constant throughout the last year. Single family home completions are up 17% year over year but down 2.6% from last month. Multi-family home completions are up 18% from last year but down 7.6% from last month. 

Overall it appears that demand for new single family housing is tapering. A reduction in the number of permits sought and the number of completions along with an increase in the number of homes waiting to be built and under construction indicate the industry is struggling to expand further, thus avoiding a bullwhip effect but slowing down production capacity. Developers are eager to finish projects underway but remain hesitant to start new construction. This makes sense as the price of inputs has increased substantially but the final cost of production has increased by a much smaller amount reducing overall profitability of new projects.