Thursday, January 18, 2018

Comments on December Housing Starts

by Bill McBride on 1/18/2018 11:30:00 AM

Earlier: Housing Starts decreased to 1.192 Million Annual Rate in December

The housing starts report released this morning showed starts were down 8.2% in December compared to November, and starts were down 6.0% year-over-year compared to December 2016.

On a yearly basis, starts in 2017 were up 2.4% to 1.202 million compared to 1.174 million in 2016.  Single family starts were up 8.5% in 2017 (compared to 2016) and multi-family starts were down 10.1%.

This was the highest level for total housing starts and single family starts since 2007.

Here is a table of housing starts since the bubble peak in 2005.

Housing Starts (000s)
Total
Housing
Starts
ChangeSingle
Family
Starts
Change
20052,068---1,716---
20061,801-12.9%1,465-14.6%
20071,355-24.8%1,046-28.6%
2008906-33.2%622-40.5%
2009554-38.8%445-28.4%
20105875.9%4715.9%
20116093.7%431-8.6%
201278128.2%53524.3%
201392518.5%61815.4%
20141,0038.5%6484.9%
20151,11210.9%71510.3%
20161,1745.6%7829.4%
20171,2022.4%8488.5%

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 down 6.0% in December 2017 compared to December 2016, and starts were only up 2.4% for the year

Note that single family starts were up 8.5% in 2017, and the weakness (as expected) was in multi-family starts.

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.