Obstacles Linger, Even in Face of Uptick
Supply side challenges continue to hamstring both new housing and the residential-construction trade, even as both market sectors continue to exhibit significant 2021 gains. Among the key statistics and forecasts released in recent weeks by government agencies, research firms and industry-related trade associations were the following:
HOUSING STARTS & NEW-HOME SALES
Despite recent gains in housing production, concerns linger over weakening permit numbers, a slowdown in new-home sales and rising materials costs, the National Association of Home Builders said. Overall housing starts were pegged at a seasonally adjusted annual rate of 1.64 million units, according to the latest available figures, as strong demand helped offset supply-side challenges. Builders continue to contend with rising home prices and materials delays, as well as with shortages of buildable lots, a dearth of skilled labor and a challenging regulatory climate, said Robert Dietz, NAHB chief economist. “The weakening of single-family and multifamily permits is due to higher material costs, which have pushed new home prices higher since the end of last year,” Dietz said. “This is a troubling sign for future housing production (and) a challenge for a housing market that needs additional inventory.”
Residential construction professionals experienced their busiest quarter since at least 2015 in the first three months of 2021, with confidence among remodeling construction and design firms running high, according to Houzz Inc. The online platform for home remodeling and design reported positive results for its “Q3 2021 Houzz Renovation Barometer,” a quarterly gauge of residential renovation market expectations, project backlogs and recent activity among businesses in the construction, architectural and design services sectors. However, the heightened activity is not without challenges, according to Houzz, which reported that supply chain delays, extreme weather patterns, rising product and material costs and labor shortages “continue to create major headwinds for the industry.” In a related development, annual gains in homeowner improvement and maintenance spending are poised to accelerate in the second half of 2021 and remain elevated through mid-year 2022, according to the Leading Indicator of Remodeling Activity (LIRA), released in by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. The LIRA projects that annual growth in home renovation and repair expenditures will reach 8.6% by the second quarter of 2022, with annual expenditures expected to exceed $380 billion.
Existing-home sales, despite several months of declines, were up 22.9% from a year ago, and available supply has improved in recent months due to gains in housing starts and existing homeowners listing their homes, the National Association of Realtors reported. “Home sales continue to run at a pace above the rate seen before the pandemic,” said Lawrence Yun, chief economist for the Washington, DC-based NARI, which pegged the latest seasonally adjusted annual rate for resales at 5.86 million units. Total inventory was down 18.8% from a year ago, while unsold inventory is down year to date, from 3.9-month supply in 2020 to a 2.6-month supply at the same time this year, the NAR added.
Reflecting gains in new construction and residential remodeling, domestic shipments of major home appliances continued their rebound from the impact of COVID-19 in the first half of 2021, the Association of Home Appliance Manufacturers reported. According to the Washington, DC-based AHAM, an April-to-June spike of 23.7% over the same quarter a year ago was largely responsible for an overall year-to-date gain of 26.6% in major appliance shipments compared to the same six-month period in 2019. First-half gains were posted in all key product categories, including food preservation (+31.6%), home laundry (+27.7%), cooking (+24.1%) and kitchen cleanup (+17.4%), AHAM noted.
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