The US housing market weathers the storm
Construction spending grew by 4,7% in 2020. Total new home starts tot up 1.38 million homes (+7%), the highest annual level since 2006
In spite of the struggling economy in 2020 - the pandemic’s impact sent U.S. GDP to a 3.5% decrease from the previous year -, some segments of the economy in the United States remained healthy last year. One of them is the construction industry, which performed very well, bolstered by the strong housing market. U.S. construction spending (which includes both private and public residential and non-residential construction) increased for the ninth consecutive year to its highest level on record. The $1.43 trillion total represented a 4.7% increase from the previous year.
Focusing the analysis on the residential segment, total new home starts continued their upward trajectory (uninterrupted since 2010), reaching 1.38 million homes, that is the highest annual level since 2006. The 7.0% increase from 2019 was largely driven by an 11.5% increase in the single-family market, which comprised 71.7% of total starts. Multi-family units, on the other hand, declined 3.1% vs. the previous year.
Another encouraging sign for the residential market was the continued rise of new single-family home sales, which were up for the ninth straight year and reached their highest level since 2006. The 811,000 units sold in 2020 represented a strong 18.8% increase from the previous year.
Looking ahead, the National Association of Home Builders (NAHB), predicts new single-family starts to grow 5% in 2021, multifamily starts to decline by 11%, and total starts to be flat.
Key concerns for the housing market include rising prices of building materials and a lack of availability due to the pandemic and tariffs, as well as labor costs and shortages. These factors, along with record low inventory levels, also impacted affordability for potential homebuyers, as last year the median new home sales price reached a record high of $334,000.
The average 30-year fixed mortgage rate was 3.11% last year, down from 3.94% in 2019 and the lowest annual rate on record.
Aided by a government moratorium on foreclosures last year due to the pandemic, foreclosure filings, a key inverse indicator of the residential market’s health, declined to their lowest level since tracking began. The 214,000 filings (0.16% of all U.S. housing units) recorded in 2020 represented a 56.5% drop from the previous year. However, with the moratorium scheduled to expire at the end of June 2021, unless there is an extension, foreclosures will likely pick up in the second half of the year, as lenders begin working through the backlog.