Single-Family Construction Slowed in April

Single-family starts fell 18% in April, pulling down total construction starts 2% in April to a seasonally adjusted annual rate of $853.5 billion, according to Dodge Data & Analytics.

Multifamily starts rose 5%, which limited the slide of overall residential building starts to 12% and a seasonally adjusted annual rate of $387.8 billion in April, according to Dodge. Total residential starts were 24% higher year to date. Single-family starts rose 31%, while multifamily starts increased 6%.

“The pullback in single-family construction starts was inevitable after showing exceptional strength over the past year,” said Richard Branch, chief economist for Dodge Data & Analytics, said in a prepared statement. “Higher material prices, supply shortages, and a dearth of skilled construction labor were bound to catch up with housing and will ultimately limit the ability of this sector to show the same rate of expansion this year as it did last.”

While lumber has been an issue for single-family builders, timber and timberland prices are also likely headed for a long-term upward trend due to new demand, according to Scott Reaves, director of forest operations at Domain Timber Advisors. This could put even more pressure on single-family starts. 

“The fundamental drivers are the value of the trees at maturity and underlying land. Both factors currently have upward pricing pressure,” Reaves tells GlobeSt.com. “Sawtimber pricing is benefitting from increased consumption for use in home remodeling and construction.

The $232 million Travis Residential Tower 1 in Austin, Texas; the $173 million 241 W 28th St mixed-use project in New York; and the $165 million Union Square Tower in Somerville, Massachusetts, were the largest multifamily projects to break ground in April.

While single-family construction declined in April, nonresidential building and nonbuilding starts both gained. Branch says nonresidential starts are stabilizing and should continue to heal throughout 2021.

Nonbuilding construction starts increased 2% in April to a seasonally adjusted annual rate of $189.5 billion. The utility and gas plant category led the way, gaining 5%. Environmental public works and highways and bridges rose 2% and 1%, respectively, while the miscellaneous nonbuilding category dropped 3%.

Total nonbuilding starts were 6% higher than during the first four months of 2020 on a year-to-date basis. Starts in the environmental public works category jumped 37% higher and miscellaneous nonbuilding spiked 25%. Utility and gas plant starts rose 3% higher, while highway and bridge starts were down 11% on a year-to-date basis.

The $625 million Atkina Solar Power in Wharton County, Texas; the $530 million New York Energy Solution Transmission Project in Claverack, New York; and the $357 million North City Pure Water Facility in San Diego, California were the largest nonbuilding projects started in April.

While residential building slowed in April, nonresidential building starts rose 16% in April to a seasonally adjusted annual rate of $276.3 billion. Driven by education, transportation, and recreation buildings, institutional building starts rose 19%. With gains in the office and warehouse categories, commercial starts rose 12%. Manufacturing starts climbed 25% in April.

Nonresidential building starts were 17% lower than during the first four months of 2020 than the same period in 2020. Commercial starts fell 20% and institutional starts were down 18%. Manufacturing starts rose 13% through the first four months of 2021 compared to the same period in 2020.

The $1.2 billion conversion of a storage building to an office project in New York, the $530 million Mickey Leland International Terminal in Houston and a $325 million Amazon office project in Bellevue, Washington were the largest nonresidential building starts in April.