Housing Completions will Increase Sharply in 2022

Likely most completions since 2006

Even as housing starts slow, there will be a sharp increase in new supply in 2022 including both single family homes and apartments.

This graph shows total housing completions and placements since 1968 with an estimate for 2022. Note that the net additional to the housing stock is less because of demolitions and destruction of older housing units.

My current estimate is total completions (single family, multi-family, manufactured homes) will increase about 17% in 2022 to almost 1.7 million. If correct, this would be the most completions since 2006.

The breakdown of my current estimate:

• Single family completions will increase to around 1.1 million from 970 thousand in 2021.

• Multi-family (including 2 to 4 units) will increase to around 460 thousand from 364 thousand in 2021.

• Manufactured homes will increase to around 120 thousand from 106 thousand last year.

The reason there will be so many completions in 2022 is because there is a record number of housing units under construction. See: May Housing Starts: All-Time Record Housing Units Under Construction

Supply constraints have lengthened the time from start to completion. We can see the impact of supply constraints by looking at the gap between single family starts and completions. It usually only takes about 6 months between starting a single-family home and completion, but it has taken longer during the pandemic.

The next two graphs use a 12-month rolling total for NSA starts and completions. The blue line is for single family starts and the red line is for single family completions. Completions (red) will increase in 2022 even as starts (blue) decline.

And here is the graph for multi-family starts and completions. Starts picked up sharply, but completions turned down over the last year due to the construction delays.

This is what Fed Chair Powell was referring to last week when discussing house prices:

How much will it affect housing prices? Not really sure. Obviously, we are watching that quite carefully. You’d think over time … There is a tremendous amount of supply in the housing market of unfinished homes … and as those come online …

He didn’t finish that thought, but clearly with weakening demand, and more new supply (and increasing existing home supply), house price growth will slow sharply. Rent growth should slow too. (But house prices will be up 20%+ year-over-year in the Case-Shiller report next week due to reporting lags!)