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U.S. single-family homebuilding drops; construction backlog soars

Credit: REUTERS/MIKE BLAKE

U.S. single-family homebuilding tumbled in October while the number of houses authorized for construction but not yet started jumped to a 15-year high, underscoring the disruption on the housing market from an ongoing shortage of materials and labor.

By Lucia Mutikani

WASHINGTON, Nov 17 (Reuters) - U.S. single-family homebuilding tumbled in October while the number of houses authorized for construction but not yet started jumped to a 15-year high, underscoring the disruption on the housing market from an ongoing shortage of materials and labor.

Though the report from the Commerce Department on Wednesday showed an increase in permits for future homebuilding, the rise was concentrated in the volatile multi-family housing segment. This will do little to alleviate an acute shortage of houses on the market, which has led to record annual gains in home prices.

"Residential housing construction activity continues to flounder; no one has figured out how to produce more homes for Americans where shortages and home price inflation persists," said Christopher Rupkey, chief economist at FWDBONDS in New York.

Single-family housing starts, which account for the largest share of the housing market, dropped 3.9% a seasonally adjusted annual rate of 1.039 million units last month.Starts fell in all four regions.

Homebuilding has essentially been treading water this year as builders battle shortages and higher prices of raw materials. A survey from the National Association of Home Builders on Tuesday showed confidence among single-family homebuilders rose for the third straight month in November, but noted that "supply-side challenges, including building material bottlenecks and lot and labor shortages, remain stubbornly persistent."

Lumber, which is used for framing, remains expensive and prices for copper, another essential material in homebuilding, are high. In addition, there were about 333,000 job openings in the construction industry as of the end of September.

The materials squeeze could ease during winter, a typically slow season for homebuilding in the Northeast and Midwest.

Starts for buildings with five units or more increased 6.8% to a rate of 470,000 units last month. With single-family homebuilding declining, overall housing starts slipped 0.7% to a rate of 1.520 million units in October.

Economists polled by Reuters had forecast starts rebounding to a rate of 1.576 million units.

Starts have declined from the 1.725 million unit-pace scaled in March, which was more than a 14-1/2-year high.

Still, home building remains underpinned by a severe shortage of previously owned homes on the market, which has resulted in record house price increases.

The backlog of single-family houses authorized for construction but not yet started jumped 4.8% to a rate of 152,000 last month, the highest since August 2006.

Permits for future homebuilding increased 4.0% to a rate of 1.650 million units in October. Single-family permits rose 2.7% to a rate of 1.069 million units, leaving them just above starts.

Permits for buildings with five units or more surged 6.5% to a rate of 528,000 units. Workers returning to offices and schools reopening for in-person learning, thanks to COVID-19 vaccinations, are fueling demand for rental apartments.

Housing completions were unchanged at a rate of 1.242 million units. Single-family home completions dropped 1.7% to rate of 929,000 units.

The stock of single-family housing under construction increased 1.4% to a rate of 726,000 units last month.

(Reporting By Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)

((Lucia.Mutikani@thomsonreuters.com; 1 202 898 8315; Reuters Messaging: lucia.mutikani.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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