Tuesday, August 17, 2010

Q2: Quarterly Housing Starts by Purpose

by Bill McBride on 8/17/2010 11:49:00 AM

This morning the Census Bureau released the "Quarterly Starts and Completions by Purpose and Design" report for Q2 2010.

Housing Starts Click on graph for larger image in new window.

This graph shows the NSA quarterly starts intent for four categories since 1975: single family built for sale, owner built (includes contractor built for owner), starts built for rent, and condos built for sale.

Condo starts in Q2 were just above the all time record low (4,000 vs 3,000 in Q4 2009).

Units built for rent set an all time record low in Q1 (19,000 units in Q1 2010) and rebounded to 31,000 units in Q2. Some of this increase is seasonal, but it does appear that many large apartment owners think the vacancy rate has peaked - and some builders and owners are starting to build new apartments (probably for delivery in 2011).

Starts for owner built units increased too. In Q2, there were 44,000 owner built units started - up from 38,000 in Q2 2009.

And the largest category - starts of single family units, built for sale - increased to 93,000 in Q2 from 86,000 in Q1. Some of this was seasonal, and some was related to the tax credit (although most of the tax credit starts were probably in Q1).

Of course single family starts, built for sale, will decline sharply in Q3.

Comparing Housing Starts and New Home Sales

Monthly housing starts (even single family starts) cannot be compared directly to new home sales, because the monthly housing starts report from the Census Bureau includes apartments, owner built units and condos that are not included in the new home sales report.

However it is possible to compare "Single Family Starts, Built for Sale" to New Home sales on a quarterly basis. This is not perfect because of reporting differences and changes in cancellation rate - but it is close. The quarterly report shows that there were 93,000 single family starts, built for sale, in Q2 2010, and that is just below the 97,000 new homes sold for the same period. This data is Not Seasonally Adjusted (NSA).

This suggests that home builders are starting about the same number of homes that they are selling (unlike in 2005 and 2006 when builders built far too many spec homes).