Friday, March 16, 2018

Comments on February Housing Starts

by Calculated Risk on 3/16/2018 03:40:00 PM

Earlier: Housing Starts decreased to 1.236 Million Annual Rate in February

The housing starts report released this morning showed starts were down 7.0% in February compared to January, and starts were down 4.0% year-over-year compared to February 2017.  

The decline in starts was due to the volatile multi-family sector.  Single family starts were up 2.9% year.

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

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

Starts were down 4.0% in February compared to February 2017.

Note that February 2016 was a pretty strong month for housing starts, so this was a difficult comparison.  The next three months will be easier.  

Through two months, starts are up 1.6% year-to-date compared to the same period in 2017.

Single family starts were up 2.9% year-over-year, and also up 2.9% compared to January.

Multi-family starts were down 18.7% year-over-year, and down 26.1% compared to January (multi-family is volatile month-to-month).

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 a year or so.

As I've been noting for a few 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.