Builders Confident in the Face of Housing Challenges

By at 17 November, 2021, 1:10 pm


by Raymond J. Keating – 

The residential housing construction sector achieved a phenomenal bounce back after the initial COVID-19 hit. But since the start of this year, the industry has been treading water, albeit at a higher level than what prevailed pre-pandemic.

The latest “Monthly New Residential Construction” report showed that hosing building permits increased by 4.0 percent in October versus the previous month. Meanwhile, housing starts in October were down by 0.7 percent in October.

The two following charts illustrate the recovery that occurred after the pandemic struck into early 2021, and the subsequent stagnation or even slight decline.

Source: Federal Reserve Bank of St. Louis, FRED

Source: Federal Reserve Bank of St. Louis, FRED

The recent stagnation largely is a function of supply challenges, given that demand continues to run high. As the National Association of Home Builders Housing Market Index, released on November 16, found:

“Low existing inventories and strong buyer demand helped push builder confidence higher for the third consecutive month even as supply-side challenges — including building material bottlenecks and lot and labor shortages — remain stubbornly persistent.”

The NAHB noted challenges regarding building materials, labor, supply chains, and building lot access. NAHB Chief Economist Robert Dietz pointed out, “Lot availability is at multi-decade lows and the construction industry currently has more than 330,000 open positions.”

Finally, it again must be noted that residential housing construction is overwhelmingly about small businesses, with 92.3 percent of employer firms in the residential building construction sector having fewer than 10 employees, and 97.4 percent fewer than 20 workers.

When we’re talking housing, we’re talking small business, as well as a sector that is important to overall economic growth.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.


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