All posts by judith she



According to a new report by the Home Builders Institute, the construction industry needs more than 61,000 new hires every month if the industry is to keep pace with growth. That would equate to 2.2 million additional construction workers by 2024. At the present time, it is estimated that there are 300,000 to 400,000 unfilled positions each and every month as skilled tradesmen continue to retire-out of the industry. Industry Aid – In response to the foregoing conundrum, one small step: The Home Builders Institute ( recently opened a new jobs training facility in Orlando, Florida. The BuildStrong Academy of Orlando will train and place area students who want to pursue careers in the skilled trades for the building industry. Officials expect the training center to serve approximately 500 new trainees by year-end 2022.  

New Residential Construction – Building permit issuance in September was at an annual rate of 1,589,000, 7.7% below the revised August rate but virtually flat year-over-year.

Housing starts were at an annual rate of 1,555,000 in September, 1.6% below the revised August rate but 7.4% above the September 2020 rate.

And housing completions reflected supply chain and labor issues — down 4.6% month-over-month and 13% year-over-year.   

On a year-over-year basis, permit issuance was up in all regions led by the Midwest (+3.7%), followed by the Northeast (+3.3%), the West (+3.1%) and the South (+0.9%).

For the September period, permits authorized but not started were up 12.4% nationally, year-over-year, and were the most prevalent in the Northeast (+63.2%) compared to +36.0% in the Midwest, +18.0% in the West and +15.6% in the South.

Builder Bits – Builder sentiment increased to a reading of 80 in October, up from 76 in September, which ended a three month decline, according to the NAHB/Wells Fargo Housing Market Index (HMI).  This compares to a reading of 83 one year prior.

Builder sentiment has been gradually cooling since hitting an all-time high of 90 in November 2020. While supply chain/material issues persist, the rate of cost escalation has eased with regard to some products resulting in builder confidence rebounding slightly.

On a regional basis, builder sentiment registered the highest in the South and West (80 and 83, respectively) with the Northeast increasing from 67 to 72 and the Midwest remaining static at 69. Base price increases are reportedly starting to plateau.

BuilderOnline reports that 38% of builders did not raise base prices in September and nearly half raised base prices $5,000 or less. More than 80% of builders continue to report labor shortages, up from 69% in August and more than half noted land disruptions, up from 40% the month prior while supply shortages in several product categories continue to cause construction delays.

New Homes v. Existing Homes – Lots of chatter about how new home and existing home prices appear to be married lately with both median prices coming in in the low $300,000s. But on a per-square foot basis within comparable markets, new home prices remain higher. Two factors to consider: 1) The existing home sector is skewing toward the higher price brackets as owners seek to retrieve their equity, and 2) New home construction is increasingly drawing more first-time home buyers, requiring builders to construct more affordable homes.

Custom Home Starts Wane – According to the Census Bureau’s most recent Survey of Construction (SOC), the share of custom homes started in 2020 (17.8%) is the lowest since 2005. Quarterly statistics show that the declining share of custom homes that began in 2020 continued into Q1 2021. When analyzed by Census Divisions, the data show that the highest custom home share in 2020 was 44.4% in the Mid-Atlantic Division, followed by the East South-Central Division and the New England Division at 36.8% and 36.7%, respectively. The lowest shares of custom homes were found to be in the South Atlantic Division (10.8%), followed by the Mountain Division at 12.5%.

Buyer Motivation – While the pandemic prompted a surge in home buying as workers enjoyed the option of working from home, the combination of Millennial, Gen-X and Baby Boomer buyers collectively shopping for homes at the same time pushed sales across all price points. Gen-Xers, the market segment most scarred by the Great Recession, have now become a dominant player in the housing market due, in large part, to burgeoning home equity. CoreLogic Q221 data reveal that homeowners with mortgages (63% of all properties) have seen their equity increase by $2.9 trillion+/- or 29.3% year-over-year.


Following the trends . . .

Under the “New Residential Construction” portion of the most recent Current Climate column, we noted that construction activity appeared to be in seasonal moderation in April. To recap: building permits stood at 1.76 million for a 60.9% year-over-year increase; housing starts were at 1.569 million, up 67.2% year-over-year; and, housing completions were at an annual rate of 1.449 million for a 21.7% y/y jump. However, all indicators reflected comparisons to a bleak 2020 in which COVID-19 ruled. On a month-over-month basis, all were either flat or down, hence the seasonal moderation observation.

Based on May activity, the observation appears appropriate. Building permits in May dropped to an annual rate of 1.681 million, down 3.0% month-over-month and just 34.9% above the May 2020 rate, reflecting a decrease of 26 percentage points, while housing completions dropped to an annual rate of 1.368 million, down 4.1% month-over-month and representing a 16.1% year-over-year increase for a 5.6 percentage point loss. However, while housing starts exhibited a 16.9 percentage point decline in growth year-over-year, on a month-over-month basis starts were up 3.6% to an annual rate of 1.572 million units.

Coincidentally, homebuilder confidence fell to its lowest level since August 2020 by June, to a reading of 81 for single-family homes, reportedly due in part to material shortages. However, the hypothesis doesn’t really sync with the increase in housing starts. Something to keep an eye on.

Further, at this writing Bloomberg reports that lumber prices posted the largest-ever weekly decline as sawmills ramped up output and buyers held off on purchases. Prices in Chicago fell 18% during the week of June 11th and according to the report, lumber futures have now dropped nearly 40% from the record high reached on May 10th.

In the Mortgage Activity portion of the Current Climate column, we reported on the week ending May 21st, when, after two weeks of increases, mortgage applications had dropped 4.1%, followed by two more weeks of declines. But what goes down, eventually goes up and applications did increase 4.2% in the week ending June 11th.

Nevertheless, purchase applications were down 17% from a year ago mid-month, theoretically due to mortgage interest rates that stubbornly hover above the 3%+ level.

Stay tuned . . .



In the most recent edition of BMB, we had the pleasure of announcing the inaugural Meyer’s Research LLC New Home Pending Sales Index. The index, published mid-month, showed a significant 14.3% increase in new home sales, year-over-year.

Two weeks later, the National Association of Realtors (NAR) Pending Homes Sales Index (PHSI) was published, showing a much lower 7.4% year-over-year increase. The disparity between the two piqued our interest, so we began to dig.

In addition to a two-week swing in publication dates, the primary distinction between the two indices is, obviously, the product analyzed. The Meyer’s NHPSI measures new homes under contract while the NAR PHSI measures existing home pending transactions.

A comparison of the two indices suggests that new construction is being welcomed by the consumer, translating to stronger building activity. Privately-owned housing units authorized by building permits in December were at an annual rate of more than 1.4 million for a 6%+/- year-over-year increase, while housing starts came in at more than 1.6 million, reflecting a whopping 40.8% y/y increase. In both cases, approximately two-thirds of the activity was for single-family homes.

Zillow reports that there were more than 120,000 fewer homes for sale at the end of the year, reflecting a 7.5% year-over-year decline. Low for-sale housing inventory has become the bane of our industry’s existence as household formations have far outpaced housing starts for several years now, resulting in potential first-time buyers becoming renters. Estimates show more than 123 million household formations as of September 2019, while the average number of single-family housing starts has hovered just above 820,000 for the last five years, suggesting a shortage of more than 400,000 units per year, on average.

New home construction activity is a prerequisite to our industry’s health. Just 3.5% of all U.S. housing units have been constructed since 2014 and approximately two-thirds of standing inventory is more than 30 years old, suggesting a significant amount of both functional and economic obsolescence.  So . . . let’s keep those housing starts coming!