According to new residential permit data compiled by the Home Builders Association of Southeastern Michigan (HBA) and reported in the HBA/Carter Lumber Southeastern Michigan Residential Building Activity Report, single-family home permits activity in June was tepid, while multi-family home permits saw its second-best year since 2017.
“The results for June are disappointing but not necessarily surprising,” says Michael Stoskopf, CEO of the HBA. “While June’s result marks the 13th consecutive month with permits at or above the 300-permit threshold, the ongoing supply chain challenges combined with strong demand for new home product is creating a unique situation.”
The 336 single-family home permits issued across Macomb, Oakland, St. Clair, and Wayne counties in June were nearly 26 percent lower than the revised total for May of this year (453), and 15 percent lower than June of 2019 (397) for a seasonal comparison absent of COVID-19 interruption.
The National Association of Home Builders says that in southeast Michigan, for every $1,000 increase in the price of a home, around 2,300 households are no longer able to financially qualify for a mortgage. From June 2020 to June 2021, the average value of a new home permit has risen by 11 percent, or $31,000.
“The substantial increases to the price of a new home — the result of increased material and labor costs then amplified by price escalation from buyer competition — are beginning to strain the ability of our region’s families to afford a new home, leading to a slowdown in new home permits being issued,” says Stoskopf.
A surge in new multi-family rental permits is being driven, in part, by affordability. Year-to-date, 1,196 multi-family home permits have been issued, making it the second-best year since 2017 when 1,356 permits were issued (dating back to 1998).
As a result of recent activity, the HBA is lowering its forecast activity for the next six months, with an average of 333 permits per month being projected. A historically low amount of inventory and existing home sales are driving economic factors.
The outlook would be 10 percent to 15 percent higher, but lower employment numbers, a decline in North America vehicle production due to a computer chip shortage, and higher crude oil prices, are impacting home sales and permits, HBA officials state.