December Housing Starts: Most Housing Units Under Construction Since 1973

Housing Starts Increased to 1.702 million Annual Rate in December

From the Census Bureau: Permits, Starts and Completions

Special Note: Permits were distorted in December: “In December, there was a large increase in building permits issued in Philadelphia, PA. Philadelphia enacted several real estate tax changes for residential projects permitted after December 31, 2021.”

Housing Starts:
Privately‐owned housing starts in December were at a seasonally adjusted annual rate of 1,702,000. This is 1.4 percent above the revised November estimate of 1,678,000 and is 2.5 percent (±13.8 percent)* above the December 2020 rate of 1,661,000. Single‐family housing starts in December were at a rate of 1,172,000; this is 2.3 percent below the revised November figure of 1,199,000. The December rate for units in buildings with five units or more was 524,000.

An estimated 1,595,100 housing units were started in 2021. This is 15.6 percent (±4.0 percent) above the 2020 figure of 1,379,600.

Building Permits:
Privately‐owned housing units authorized by building permits in December were at a seasonally adjusted annual rate of 1,873,000. This is 9.1 percent above the revised November rate of 1,717,000 and is 6.5 percent above the December 2020 rate of 1,758,000. Single‐family authorizations in December were at a rate of 1,128,000; this is 2.0 percent above the revised November figure of 1,106,000. Authorizations of units in buildings with five units or more were at a rate of 675,000 in December.

An estimated 1,724,700 housing units were authorized by building permits in 2021. This is 17.2 percent (±0.6 percent) above the 2020 figure of 1,471,100.
emphasis added

The first graph shows single and multi-family housing starts since 2000 (including housing bubble).

Multi-family starts (blue, 2+ units) increased in December compared to November.   Multi-family starts were up 53% year-over-year in December. Single-family starts (red) decreased in December and were down 10.9% year-over-year.

The second graph shows single and multi-family starts since 1968.

The second graph shows the huge collapse following the housing bubble, and then the eventual recovery (but still not historically high).

Total housing starts in December were above expectations and starts in October and November were revised up slightly, combined.

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The third graph shows the month-to-month comparison for total starts between 2020 (blue) and 2021 (red). 

Total starts were up 2.5% in December compared to December 2020. 

The 1.595 million total starts in 2021 were up 15.6% from 1.380 million in 2020. Starts in 2021 were the most since 2006 when 1.801 million units were started.

The fourth graph shows housing starts under construction, Seasonally Adjusted (SA).

Red is single family units. Currently there are 769 thousand single family units under construction (SA). This is the highest level since February 2007.

For single family, most of these homes are already sold (Census counts sales when contract is signed). The reason there are so many homes is probably due to construction delays. Since most of these are already sold, it is unlikely this is “overbuilding”, or that this will impact prices (although the buyers will be moving out of their current home or apartment once these homes are completed).  

Blue is for 2+ units. Currently there are 750 thousand multi-family units under construction.  This is the highest level since July 1974! For multi-family, construction delays are probably also a factor. The completion of these units should help with rent pressure.

Census will release data in March (part of February survey) on the length of time from start to completion, and that will probably show long delays in 2021. In 2020, it took an average of 6.8 months from start to completion for single family homes, and 15.4 months for buildings with 2 or more units.

Combined, there are 1.519 million units under construction. This is the most since November 1973.

Comparing Starts and Completions

Below is a graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market and starts are important because that is future new supply (units under construction is also important for employment).

These graphs use a 12-month rolling total for NSA starts and completions.

The blue line is for multifamily starts and the red line is for multifamily completions. Starts have picked up, but completions (red) have turned down - due to the construction delays. 

The last graph shows single family starts and completions. It usually only takes about 6 months between starting a single-family home and completion - so the lines are much closer than for multi-family. The blue line is for single family starts and the red line is for single family completions.

The recent gap between starts and completions is due to the construction delays.

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