; Homebuilding Supporting Recovery

The housing market has bounced back from a pandemic-induced slump earlier this year, and is supporting overall economic growth. Homebuilding was strong heading into the pandemic, and the fundamentals have improved since then. The 30-year fixed mortgage rate has fallen below 3 percent, boosting affordability. The job market is improving, and during the downturn held up better for higher-paid workers, who are more likely to buy a new home. Rising stock prices have boosted wealth for higher-income households. And it could be that potential buyers are more willing to consider purchasing a single-family home because of the pandemic, although a vaccine could change that. PNC expects residential construction to continue to improve into 2021, boosting the overall economy. Single-family starts will be especially strong; they are more important for economic growth than multifamily starts.

Housing starts rose 4.9 percent in October from September, to 1.530 million units at a seasonally-adjusted annualized rate. Starts in September were revised higher, to 1.459 million, from 1.415 million. Although starts are down somewhat from late 2019 and early 2020, they have rebounded from March and April, when construction sites closed down in the early stages of the pandemic; total starts were 934,000 in April.

Single-family starts rose 6.4 percent in October to 1.179 million. This was the highest level for single-family starts since 2007, in the aftermath of the housing boom. Multifamily (apartment and condominium) starts were unchanged at 351,000 in October from September.

Residential construction permits were flat in October from September at 1.545 million units at a seasonally-adjusted annualized rate; September permits were revised slightly lower from 1.553 million. Although permits were unchanged over the month, September and October permits were the highest since 2007. Single-family permits rose 0.6 percent over the month to 1.113 million, their highest level since early 2007. Multifamily permits fell 1.6 percent in October to 425,000.

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