Tuesday, July 19, 2011

On Track for Record Low Housing Completions in 2011

by Bill McBride on 7/19/2011 07:01:00 PM

As I mentioned earlier, the U.S. is on pace for a record low number of multifamily completions in 2011. That is just part of the story ... the U.S. is on pace for a record low number of total completions, and the fewest net housing units added to the housing stock, since the Census started tracking completions.

Here are some excerpts from Tom Lawler today:

The Commerce Department reported that US manufactured housing shipments ran at a seasonally adjusted annual rate of 48,000 in May, up slightly from April’s 46,000, but still an incredibly low pace by historical standards.
Total housing production in 2011 should fall south of 600,000 units, compared to the 2.092 million housing units that came on line in 2006.

Sadly, there are no good, timely data on the likely number of housing units that will be lost to various factors (demolition, conversions, disaster, etc.). The Census 2010 data suggested that the annual “scrappage” rate was substantially lower than other Census data had suggested last decade, though that could well have been related to the housing boom years, with higher conversions or units added from non-residential use than various surveys (based on relatively small samples) suggested. Anecdotal evidence suggests that scrappage rates of late would not be that low, and a conservative estimate for 2011 would be in the 250,000 range – implying growth in the housing stock for the calendar year of under 350,000 units.

If those numbers are in the ballpark, then from April 1st of last year (the Census 2010 snapshot) to the end of 2011, the US housing stock will probably have grown by only about 706,000 units or so. Sadly, there are no good, reliable, and timely data on US household growth since April 1, 2010 (theme on government housing data!), making it tough to estimate household growth from 4/1/2010 to 12/31/2011. If annualized household growth over that 21-month period were, say, around 800,000 (below “trend”), then the “excess” supply of housing from April Fool’s Day 2010 to the end of 2011 would have shrunk by about 694,000.
I put the following table together for the last few years. For 2011 I used the first half pace (manufactured housing through May).

As I noted earlier, multi-family housing completions will fall even further and will probably be close to 100 thousand units this year. Also note that Lawler thinks scrappage is closer to 250,000 per year.

So this means there will be a record low number of housing units added to the housing stock this year (good news with all the excess inventory), and that the overhang of excess inventory should decline significantly in 2011.
Housing Units added to Stock (000s)
 2005200620072008200920102011 (1st Half pace)
1 to 4 Units1,673.41,695.31,249.8842.5534.6505.2437.0
5+ Units258.0284.2253.0277.2259.8146.5119.0
Manufactured Homes146.8117.395.781.949.85046
Total added to Stock1,878.21,896.81,398.51,001.6694.2551.7452.0

The key points are:
1) there will be record low number of completions this year, and
2) that means a record low number of housing units added to the stock, and
3) that means the excess vacant inventory is declining.

Housing Starts increase in June
Multi-family Starts and Completions