U.S. Housing Starts and Permits (October 2021)

Admir Kolaj, Economist  | 416-944-6318

Date Published: November 17, 2021

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Housing starts lose additional steam in October

  • U.S. housing starts fell by 0.7% to 1.52 million (annualized) units in October, falling short of market expectations for a better 1.58 million print. Starts have declined in three of the last four months. Overall activity was also revised down for a total of 32k in August and September.  
  • The decline remained a single-family story as starts in this category fell 3.9% (or 42k). October marked the fourth straight decline for the sector. Starts in the multifamily segment, meanwhile, rose 7.1% (or 32k), which helped the sector recover the bulk of the decline in the month prior. 
  • Permitting activity was more upbeat, rising 4.0% (or 64k) to 1.65 million. The increase spanned both segments, with single-family permits rising 2.7% (or 28k) and multifamily permits rising 6.6% (or 36k).
  • Homebuilding activity was mixed across the regions. Starts rose a strong 5.6% in the Midwest, but fell in each of the remaining regions with activity down 3.3% in the West, 1.0% in the South and 0.8% in the Northeast.        

Key Implications

  • Keeping with a theme that's characterized the second half of this year, housing starts lost additional steam in October as they ticked down 0.7%. With the myriad of hurdles faced by builders, such as a supply chain disruptions, higher material costs and a shortage of workers and serviceable lots, it should be no surprise that homebuilding has eased a bit in recent months. At the same time, the fact that homebuilding is still on fairly healthy footing – the 1.54 million three-month trend is still one of the better showings since 2006 – should not be lost in month-to-month noise.
  • Underneath the headline print, the narrative remained broadly unchanged, with starts in the larger single-family segment being the main contributor to downward trend. However, the fact that single-family homebuilder confidence has been steadily improving in each of the last three months, despite facing plenty of obstacles, indicates that this sector too could turn a positive corner in the near-term.  
  • With inflation red-hot and the pandemic poised to move further in the rearview mirror, the upcoming removal of monetary stimulus will pose an added hurdle to housing demand in the months and quarters ahead. Despite this, the fundamentals for homebuilding remain solid and activity is likely to remain well-supported thanks to expectations for a continued healing of the labor market and still exceptionally low inventory levels.