Consumer Incomes, Employment to Support Growth in US Housing Starts

12/3/2021

Cleveland, OH, December 3, 2021 — US housing starts are forecast to increase 1.0% per year in unit terms through 2025, according to Housing: United States, a report recently released by Freedonia Focus Reports. Builders will benefit from strengthening consumer finances and rising levels of employment, which will support demand for housing and new starts. Population growth and household creation will also support gains. Furthermore, increases in the number of individuals working from home as a result of the pandemic is spurring demand for nicer and larger homes with space for an office. Many of these individuals will continue to work from home or in a hybrid environment over the forecast period, supporting and perpetuating its use as justification for moving.

However, further housing start gains will be constrained by high real estate values, intensifying building codes and fees that add to labor and material costs, and economic uncertainty due to the COVID-19 pandemic. The cost of raw materials will also impact housing construction costs. For instance, the price of both untreated and pressure-treated softwood lumber reached record highs in 2020 – almost double the level in 2010 – due to surging demand and a shortage of available product. Many mills – in anticipation of declining demand due to the COVID-19 pandemic – ceased operations or reduced output. However, lumber demand surged as people undertook home improvement projects during the pandemic, fueling demand for lumber and other building materials. As the supply-demand dynamic moderates, prices will return to levels more similar to those seen historically. However, capacity expansions planned by US lumber mills will not be fully operational for a year or two, which will contribute to continued elevation of softwood lumber prices through 2025.

These and other key insights are featured in Housing: United States. This report forecasts to 2021 and 2025 US housing starts, housing stock in units, and housing completions, and average floor space per new and existing units in square feet. Each measure is segmented by housing type in terms of:

  • single-unit conventional
  • multiple-unit conventional
  • manufactured

In addition, housing starts and the housing stock, as well as existing home sales, are segmented by region as follows:

  • South
  • Midwest
  • West
  • Northeast

Furthermore, spending on residential building construction in nominal US dollars is forecast to 2021 and 2025 and is segmented by type as follows:

  • single-unit
  • multiple-unit
  • improvements

To illustrate historical trends, housing starts, the housing stock, housing completions, existing home sales, average floor space, residential building construction expenditures, the median price of new single-unit conventional homes, interest rates, and the various segments are provided in annual series from 2010 to 2020.

The definition of housing starts differs by type of building. A housing start for a conventional building is counted on the date foundation work begins. For manufactured housing, the date of placement represents a housing start. Modular and precut varieties are not considered manufactured homes; they are conventional homes. As defined by the US Census Bureau, expenditures represent architectural and engineering costs; labor, material, and overhead costs; interest and taxes paid during construction; and contractors’ profits. Improvements include additions, alterations, and major replacements (e.g., heating systems) to existing structures, but exclude maintenance and repairs.

This report includes the results of a proprietary national online consumer survey of US adults (age 18+). This Freedonia Focus Reports National Survey has a sample size of approximately 2,000, screened for response quality, and representative of the US population on the demographic measures of age, gender, geographic region, race/ethnicity, household income, and the presence/absence of children in the household.

More information about the report is available at:

https://www.freedoniafocusreports.com/Housing-United-States-FF60024/?progid=91541