Wednesday, July 18, 2018

Comments on June Housing Starts

by Bill McBride on 7/18/2018 11:55:00 AM

Earlier: Housing Starts decreased to 1.173 Million Annual Rate in June

Housing starts in June were disappointing, and starts for April and May were revised down.   However this was just one month, and most of the decline was in multi-family starts that are volatile month-to-month.

The housing starts report released this morning showed starts were down 12.3% in June compared to May, and starts were down 4.2% year-over-year compared to June 2017.

Both multi-family and single family starts were down year-over-year.

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

Starts Housing 2017 and 2018Click on graph for larger image.

Starts were down 4.2% in June compared to June 2017.

Through six months, starts are up 7.8% year-to-date compared to the same period in 2017.   That is still a solid increase.

Single family starts were down 0.2% year-over-year, and down 9.1% compared to May 2018.

Multi-family starts were down 15.3% year-over-year, and down 20.2% compared to May 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 passed 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 relatively low level of single family starts and completions.  The "wide bottom" was what I was forecasting following the recession, and now I expect a couple more years, or more, of increasing single family starts and completions.