Tuesday, March 26, 2019

Comments on February Housing Starts

by Calculated Risk on 3/26/2019 10:39:00 AM

Earlier: Housing Starts Decreased to 1.162 Million Annual Rate in February

Total housing starts in February were below expectations, however starts for December and January were revised up.

The housing starts report released this morning showed starts were down 8.7% in February compared to January, and starts were down 9.9% year-over-year compared to February 2018.

Single family starts were down 10.6% year-over-year, and multi-family starts were down 5.4%.

This first graph shows the month to month comparison for total starts between 2018 (blue) and 2019 (red).

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

Starts were down 9.9% in February compared to February 2018.

The weakness in February was primarily in the single family sector.  February starts might have been impacted by the weather.

Last year, in 2018, starts were strong early in the year, and then fell off in the 2nd half - so the early comparisons are the most difficult.

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. 

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).

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.