Tuesday, June 19, 2018

Comments on May Housing Starts

by Bill McBride on 6/19/2018 11:10:00 AM

Earlier: Housing Starts increased to 1.350 Million Annual Rate in May

The housing starts report released this morning showed starts were up 5.0% in May compared to April, and starts were up 20.3% year-over-year compared to April 2017.

Both multi-family and single family starts were up solidly year-over-year.

This first graph shows the month to month comparison for total starts between 2017 (blue) and 2018 (red).

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

Starts were up 20.3% in May compared to May 2017.

Note that starts in March, April and May of 2017 were weaker than other months, so this was a solid increase, but also a fairly easy comparison.

Through five months, starts are up 11.0% year-to-date compared to the same period in 2017.

Single family starts were up 18.3% year-over-year, and up 3.9% compared to April 2018.

Multi-family starts (including 2 units) were up 25.1% year-over-year, and up 7.5% compared to April 2018 (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 for several years following the great recession - but has turned down recently.  Completions (red line) had lagged behind - however completions have caught up to starts (more deliveries). 

It is likely that both starts and completions, on rolling 12 months basis, will now move mostly sideways.

As I've been noting for a few years, the significantly 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.