Tuesday, December 19, 2017

Comments on November Housing Starts

by Bill McBride on 12/19/2017 10:00:00 AM

Earlier: Housing Starts increased to 1.297 Million Annual Rate in November

The housing starts report released this morning showed starts were up 3.3% in November compared to October, and starts were up 12.9% year-over-year compared to November 2016.

Single family starts, at 930 thousand SAAR, were at the highest level since September 2007 (over 10 years ago).

This first graph shows the month to month comparison between 2016 (blue) and 2017 (red).

Starts Housing 2016 and 2017Click on graph for larger image.

Starts were up 12.9% in November 2017 compared to November 2016 (a fairly easy comparison), and starts are up only 3.1% year-to-date.

Note that single family starts are up 8.7% year-to-date, and the weakness (as expected) has been in multi-family starts.

My guess was starts would increase around 3% to 7% in 2017.   It looks like starts will be at the low end of that range.

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 - but has turned down recently.  Completions (red line) have lagged behind - and completions have caught up to starts (more deliveries). 

Completions lag starts by about 12 months, so completions will probably turn down in about a year.

As I've been noting for a couple of years, the growth in multi-family starts is behind us - multi-family starts peaked in June 2015 (at 510 thousand SAAR).

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 low level of single family starts and completions.  The "wide bottom" was what I was forecasting following the recession, and now I expect a few more years of increasing single family starts and completions.