Friday, July 17, 2015

Comments on June Housing Starts

by Bill McBride on 7/17/2015 02:48:00 PM

Total housing starts in June were above expectations, and, including the upward revisions to April and May, starts were strong.

There was also a significant increase for permits again in June (mostly for the volatile multi-family sector).

Earlier: Housing Starts increased to 1.174 Million Annual Rate in June

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

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

Even with weak housing starts in February and March, total starts are still running 10.9% ahead of 2014 through June.

Single family starts are running 9.1% ahead of 2014 through June.

Starts for 5+ units are up 14.9% for the first six months compared to last year.

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).

The blue line (multi-family starts) was moving more sideways, but jumped up in June.

Multi-family completions are increasing.

Even with the surge in permits this over the last two months - and strong multi-family starts in June - 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.

A strong report.