Tuesday, December 18, 2018

Comments on November Housing Starts

by Bill McBride on 12/18/2018 09:14:00 AM

Earlier: Housing Starts Increased to 1.256 Million Annual Rate in November

Total housing starts in November were above expectations (due to the volatile multi-family sector), and starts for September and October were revised up, combined.

The housing starts report released this morning showed starts were up 3.2% in November compared to October (October starts were revised down), and starts were down 3.6% year-over-year compared to November 2017.

Single family starts were down 13.2% year-over-year.  This was the weakest month for single family starts since May 2017.

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 3.6% in October compared to October 2017.

Through eleven months, starts are up 5.1% year-to-date compared to the same period in 2017.   That is a decent increase.

Single family starts are up 3.9% year-to-date.

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 turned down, and has moved sideways recently.  Completions (red line) had lagged behind - however completions and starts are at about the same level now (more deliveries). 

As I've been noting for a few years, the significant growth in multi-family starts is behind us - multi-family starts peaked in June 2015 (at 510 thousand SAAR) - however multi-family has picked up a little recently.

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 some further increases in single family starts and completions.