Tuesday, August 16, 2011

Multi-family Starts and Completions, and Quarterly Starts by Intent

by Bill McBride on 8/16/2011 11:45:00 AM

I've been forecasting that:
• Multi-family starts will be up significantly this year, but
• Multi-family completions will be at or near a record low.

Since it takes over a year on average to complete multi-family projects - and multi-family starts were at a record low last year - it makes sense that there will be a record low, or near record low, number of multi-family completions this year.

The following graph shows the lag between multi-family starts and completions using a 12 month rolling total.

The blue line is for multifamily starts and the red line is for multifamily completions. Since multifamily starts collapsed in 2009, completions collapsed in 2010.

Multifamily Starts and completions Click on graph for larger image in graph gallery.

The rolling 12 month total for starts (blue line) is now above the rolling 12 month for completions (red line), and they are heading in opposite directions. Starts are picking up and completions are declining.

It is important to note that even with a strong increase in multi-family construction, it is 1) from a very low level, and 2) multi-family is a small part of residential investment (RI). Still this is bright spot for construction.

Also today, the Census Bureau released the "Quarterly Starts and Completions by Purpose and Design" report for Q2 2011. Although this data is Not Seasonally Adjusted (NSA), it shows the trends for several key housing categories.

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

Single family starts built for sale were up seasonally in Q2. This was the 2nd weakest Q2 on record (slightly behind Q2 2009). Owner built starts were at a record low for a Q2, and condos built for sale are scrapping along the bottom.

Only the 'units built for rent' is showing any significant pickup. Some of the increase in 'built for rent' is seasonal, but this is almost a 30% increase from Q2 2010.

The largest category - starts of single family units, built for sale - is mostly moving sideways, and will remain weak until more of the excess vacant housing units are absorbed.

Housing Starts decline slightly in July
Industrial Production increased 0.9% in July, Capacity Utilization increases