December 2020 posted excellent results for the US home construction industry with a sharp hike in both new starts and permits. Single-family home construction leads the sector as it struggles to keep pace with demand. Analysts forecast another strong year for home building during 2021.
December hikes in starts and permits
By the end of December last year, US home construction had posted the best results in well over a decade. Home starts registered an annual rate of 1.67 million units while new permits stood at 1.71 million for the year.
Home starts showed an increase of 5.8% on November and a 5% rise in the year. The number of permits issued rose by 4.5% in December compared to November while the annual rate soared to 17%.
The sharp increases caught analysts by surprise – they were expecting the sector to register an uptick in starts and permits, but not to this extent. The figures represent the best for US home construction since 2006.
Single-family homes lead US home construction
As was the trend throughout 2020, single-family homes spearheaded the residential construction industry. According to figures published by Realtor.com, new starts for this type of property grew by 12% in December compared to November. The number of permits issued went up by 7.8%.
In contrast, multi-family construction registered decreases in both activity and permits. Condo-type properties saw a drop of 15.2% in new starts while permits fell by 2%.
Southwest Florida mirrors tendency
The three-county area of Southwest Florida registered similar results to the US as a whole. In the year to December, permits in the region soared by 39%. All three counties saw an increase in activity.
Sales of single-family homes in Southwest Florida went up by 37% in December, reflecting the strong interest in this type of property. In Charlotte County, transactions rose by 33% and single-family home prices went up by 13% year-on-year to reach an average of US$265,000.
Strong demand for 2021
Analysts point to another busy year for US home construction in 2021. Danielle Hale, Chief Economist for Realtor.com, says that “demand might be cooling in the face of high home prices and lack of inventory”. However, she points out that it still remains high compared to last year, giving “builders strong incentive to keep building”.
For his part, Michael Gregory, Deputy Chief Economist at BMO Capital Markets, believes home construction is “well-supported”. He points to record-low interest rates, low resale listings and the move to the suburbs as the three main trends behind this.
General consensus highlights the shortage of supply, a chronic feature of the US housing market for the last few years. “These aren’t enough homes in this country to go around and we need a long-lasting surge of construction to meet demand,” said Holden Lewis from NerdWallet.
Build for the demand
The surge in new-build properties in the US and pent-up demand present excellent investment opportunities, particularly in the buy-to-build sector. BRIC Group offers investors the chance to invest in land in Southwest Florida with a build upgrade. This involves the construction of a single-family home to sell or rent in a market with burgeoning demand.
Find out more about investing in the US home construction sector.
(Source: Realtor.com, Southwest Florida Regional Economic Indicator)