The housing market heads into the new year in a construction boom the likes of which we haven't seen since Richard Nixon was president. The U.S. Census Bureau said there were 1,679,000 privately owned housing starts in the month of November, the most since 1973, according to an analysis by Calculated Risk Newsletter.
That's for both multifamily and single-family starts and represents a nearly 12% jump from October and 8.3% more than November 2020. Single-family starts comprise nearly 1.2 million of those starts, according to the New Residential Construction Report issued by the Census Bureau on Dec. 16.
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Multifamily moving on out
Much has been reported and recorded about the move to the suburbs and beyond, caused by the pandemic-driven desire for more space as well as the growth of remote work. The National Association of Home Builders (NAHB) said the data show that's still a thing.
The trade group said its 3Q21 Home Building Geography Index shows a continuing decline in market share for multifamily construction in high-density markets such as large metro core and suburban counties and an increase in small metro-area counties.
The shift may not appear dramatic: The share of new multifamily permits was 37.9% in large metro-core markets in 3Q21, down from 40.5% in the year-ago quarter. Small metro-area counties saw their share of that activity jump from 24.9% last year at this time to 27.2% now, the NAHB said in its Dec. 16 Eye on Housing report.
"Historically, year-to-year changes in multifamily market share are slow to develop and rarely move more than one percentage point higher or lower. This makes these latest year-over-year numbers noteworthy," the NAHB report said.
What does it mean to real estate investors?
So what does all this mean to investors, especially real estate investors? Potentially a lot. For one thing, you need labor and supplies to start construction. The fact that's happened enough to move this needle is a good sign. Plus, the Census Bureau report said that building permits for all private residential construction continue to run ahead of building starts and completions, indicating continued confidence going into 2022.
Meanwhile, residential sale prices continue to be strong. Redfin, for instance, reported that November 2021 homes prices were up 15.1% from the same time last year to a median price of $383,149. That's as total national sales dipped 2.5% year over year to 572,766, that company's analysts said.
That sales decline could reflect affordability and supply issues for homebuyers more than it does demand, which could be good for the rental market. Indeed, Redfin also reported on Dec. 20 that average rents nationwide have risen 21% in a year and 7% in a month, outpacing the gain in home prices.
Now, add in interest rates rising in the face of inflation, and this can reinforce the value proposition for investors in carefully selected stocks among such players as homebuilders and real estate investment trusts (REITs) that specialize in single-family rentals and apartment buildings alike.
