Construction Starts Fell 7% in June

Construction Starts Fell 7% in June

Hamilton Township, NJ, July 28, 2021- Total construction starts fell 7% in June, declining to a seasonally adjusted annual rate of $863.6 billion, according to Dodge Data & Analytics. All three major sectors-residential, nonresidential building, and nonbuilding-lost ground during the month. Single family housing starts are reacting to the detrimental effects of rising materials prices. Large projects that broke ground in May were absent in June for nonresidential building and nonbuilding starts, resulting in declines.

“Unabated materials price inflation has driven a significant deceleration in single family construction,” says Richard Branch, chief economist for Dodge Data & Analytics. “Lumber futures have eased in recent weeks, but builders are unlikely to see much relief over the short-term, meaning building costs will continue to negatively influence the housing industry. On the other hand, the nascent recovery in nonresidential buildings has continued on as projects pile up in the planning stages. These mixed signals coming from both residential and nonresidential construction starts suggest that recovery from the pandemic will remain uneven in coming months as rising materials prices and labor shortages weigh on the industry.”

Nonresidential building starts dropped 7% in June to a seasonally adjusted annual rate of $288.0 billion. Large healthcare and manufacturing projects provided a significant boost to May, but the absence of similar projects in June led to normalized starts activity. Without the negative influence of these sectors, nonresidential starts would have increased 10% in June. Commercial starts rose 12% with all categories posting gains, while institutional starts fell by 9% and manufacturing starts lost 62% over the month. Through the first six months of 2021, nonresidential building starts were slightly ahead of the first six months of 2020. Commercial starts were up 7% and manufacturing starts were 36% higher, while institutional starts were 5% lower through the first six months.

For the 12 months ending June 2021, nonresidential building starts were 14% lower than the 12 months ending June 2020. Commercial starts were down 18%, while institutional starts fell 10%. Manufacturing starts dropped 42% in the 12 months ending June 2021.

Residential building starts fell 5% in June to a seasonally adjusted annual rate of $403.8 billion. Single family starts lost 8%, while multifamily starts were 2% higher. From January through June, total residential starts were 32% higher than the same period a year earlier. Single family starts were up 37%, while multifamily starts were 19% higher.

For the 12 months ending June 2021, total residential starts were 22% higher than the 12 months ending June 2020. Single family starts gained 29%, while multifamily starts were up 5% on a 12-month sum basis.