Home building sags in September

1.6% drop blamed on shortage of labor, supply-price surge

SILVER SPRING, Md. — U.S. home construction fell 1.6% in September as builders continue to be tripped up by supply chain bottlenecks.

The Commerce Department reported Tuesday that the decline in September left home construction at a seasonally adjusted annual rate of 1.56 million units, 7.4% above the rate one year ago. August’s number was revised upward to 1.72 million from 1.62 million.

Applications for building permits, a barometer of future activity, fell 7.7% from August to 1.59 million, but the number is virtually unchanged from September 2020. The September drop was driven by a sharp decrease in multifamily permits.

Low interest rates and a desire for more space have lured buyers into the market, but rising costs for materials, a years-long shortage of supply and shortages of skilled labor have pushed prices up. Economists and builders say demand remains strong, even as the median price for a new home is about 20% higher than a year ago.

“Momentum in demand still appears to be positive,” said economist Rubeela Farooqi of High Frequency Economics. “But supply is struggling to catch up given higher input costs and shortages that remain headwinds for builders.”

Apartment construction fell 5.1% from August to September, while single family home construction was flat from the previous month at 1.1 million units.

Construction activity by region saw declines of 27.3% in the Northeast and 6.3% in the South. The West made the biggest gain, with starts up 19.3% over August, while the Midwest came in 6.9% higher.

“The story has been unchanged this year from one

month to the next,” said Stephen Stanley, an economist with Amherst Pierpont. “Builders are doing all that they can, but it is not enough to keep up with the burst in demand created by the pandemic.”

A monthly survey of builder sentiment by the National Association of Home Builders and Wells Fargo showed sentiment improved to 80 in October from a reading of 76 in September. The index, which can range between 0 and 100, hit a record high reading of 90 last November.

Meanwhile, the report indicates builders are making little headway on project backlogs. The number of single-family homes authorized for construction but not yet started — a measure of backlogs — edged lower to 144,000 in September but remains near a 15-year high.

(AP/Rogelio V. Solis) A mason shovels a mortar mixture as he prepares to lay down bricks on the exterior wall of a new house in Flowood, Miss. U.S. housing starts decreased in September, as lingering supply-chain constraints, shortages of skilled labor and elevated materials costs continue to challenge builders.