Builders scaled up production for both single-family and multi-family projects last month as Housing Starts (which measure the start of construction on homes) were well above expectations, surging 14.8% from October to the highest level since May. While Building Permits, a sign of future construction, ticked lower in November, single-family permits hit their highest level in a year.  

What’s the bottom line? Alicia Huey, NAHB Chair, noted that, “Lower interest rates and a lack of resale inventory helped to provide a strong boost for new home construction in November.” 

Yet, even with the uptick in Housing Starts, more supply is still needed to meet demand.

When we consider the pace of completed homes that will be coming to market (around 1.5 million homes annualized) and subtract roughly 100,000 homes that need to be replaced every year due to aging, we’re well below demand as measured by household formations that are trending at 1.9 million as of the end of September. 

More demand than supply will continue to be supportive of home values, especially when we reach the busier spring homebuying season next year.