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Homebuilding Is Still a Shadow of Its Pre-Recession Self

The latest numbers from the U.S. Census Bureau show that construction starts of single-family homes in July were at 876,000 units on an annualized rate, less than half the construction pace in 2006. Meanwhile, the multifamily sector has benefited as a result of lower-than-expected single-family construction throughout this expansion.

Homebuilding activity has actually slowed in the past few quarters, as the cost of labor, land and building materials increased. In some major cities, a scarcity of available lots and delays in obtaining approvals have also been cited as reasons for the decline in residential construction.

The persistent under-building has caused prices of existing homes to rise, making them less affordable to potential home buyers and pushing more households into renting.

Apartment rents have also been rising at a solid clip in response to growing demand, but unlike homebuilders, multifamily developers continue to respond by building more projects. According to the Census Bureau, multifamily starts accounted for about 30% of all housing units started in July. That share is up about 10 percentage points from the previous two expansions, though it is in line with the historical average going back to the 1960s.

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