Tuesday, March 17, 2015

Comments on February Housing Starts

by Bill McBride on 3/17/2015 02:24:00 PM

As always, we we shouldn't let one month of data influence us too much. For February it appears housing starts were impacted by the weather, especially in the Northeast.

Here is a table showing starts in the four Census Bureau regions.  Starts in the Northeast were down 46% year-over-year:

Housing Starts (000)
  Feb-15Feb-14YoY Change
Northeast4787-46.0%
Midwest97122-20.5%
South5145022.4%
West23921710.1%
Total897928-3.3%

However, even if starts had increased year-over-year in February at the rate in the South and the West, housing starts would still have been below expectations.  So overall this was a disappointing report.

Note: It is also possible that the West Coast port slowdown impacted starts a little.  The labor situation was resolved in February, so any impact should disappear quickly.

Starts Housing 2013 and 2014Click on graph for larger image.

This graph shows the month to month comparison between 2014 (blue) and 2015 (red).

Even with the weak February, starts are running 8.4% ahead of 2014 through February.

Below is an update to the graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market, and starts are important because that is future new supply (units under construction is also important for employment).

These graphs use a 12 month rolling total for NSA starts and completions.

Multifamily Starts and completionsThe blue line is for multifamily starts and the red line is for multifamily completions.

The rolling 12 month total for starts (blue line) increased steadily over the last few years, and completions (red line) have lagged behind - but completions have been catching up (more deliveries), and will continue to follow starts up (completions lag starts by about 12 months).

Note that the blue line (multi-family starts) might be starting to move more sideways.

I think most of the growth in multi-family starts is probably behind us - although I expect solid multi-family starts for a few more years (based on demographics).

Single family Starts and completionsThe second graph shows single family starts and completions. It usually only takes about 6 months between starting a single family home and completion - so the lines are much closer. The blue line is for single family starts and the red line is for single family completions.

Note the exceptionally low level of single family starts and completions.  The "wide bottom" was what I was forecasting several years ago, and now I expect several years of increasing single family starts and completions.