BAM Key Details:

  • Lawrence Yun, chief economist for the National Association of Realtors® (NAR) reacts to new Census data showing a surge in U.S. single-family housing starts. 
  • Single-family home construction in November was up 18% from the previous month and up 42% from a year ago. 

This week, the latest Census data was released on U.S. residential construction—including building permits, housing starts, and completions for November 2023.

Census-New-residential-construction-Nov-2023

Source: Census.gov

Based on the data, which was shared during Wednesday’s Hot Sheet, single-family home construction reached a level 18% above that of the previous month. When looking at data year over year, it was 42% above the November 2022 levels. 

Lawrence Yun, chief economist for the National Association of Realtors® (NAR) noted the increase in an “Instant Reaction” posted on Tuesday, December 19. 

As home builders ramp up production, more supply will reach the market… Home builders’ sales have been up this year despite high mortgage rates due to the offer of incentives on buying down interest rates and the long-held business model of offering co-op commission to buyer agents. That’s the free market way of doing business in a very competitive industry.

Lawrence Yun

NAR Chief Economist

NAR-Single-family-housing-starts-Nov-2023

The pace of new home construction is closer to normal levels. And as production ramps up, skilled and service-oriented buyer agents will be all the more valuable in helping builders offload their inventory. 

NAR-Single-family-housing-starts-Trying-to-return-to-normal

In his reaction, Yun argues that, while this is good news for buyers, we need far more single-family construction to correct the current shortfall in housing inventory. 

Even more home building will be needed with the housing shortage persisting in most markets. Home price appreciation can only moderate from drastically improved supply. Another 30% rise in home construction can easily be absorbed in the marketplace, especially in light of recent weeks’ plunge in mortgage rates.

Lawrence Yun

NAR Chief Economist

In Wednesday’s Hot Sheet, Byron Lazine put November’s residential construction numbers in context, comparing them to what we saw in the housing market in the early 2000s. 

Census-New-housing-units-started-in-US-Nov-2023

Source: Census.gov

It’s fair to ask how long builders will sustain this level of new home construction if rates come down, which is more than likely for the foreseeable future. 

Byron also pointed out that the current pace of construction is healthier and more sustainable than in 2003 and 2005. There’s less speculative building, and builders are more cognizant of location. 

Sitting above a million on single-family and a million five on total starts, that’s what it’s going to take here for an extended period of time to get inventory at a much healthier spot in this country and in this economy.

Byron Lazine

Watch the full breakdown on the Hot Sheet, starting at the 10:04 mark