Friday, March 08, 2019

Comments on January Housing Starts

by Calculated Risk on 3/08/2019 01:19:00 PM

Earlier: Housing Starts Increased to 1.230 Million Annual Rate in January

Total housing starts in January were well above expectations, however starts for November and December were revised down.

The housing starts report released this morning showed starts were up 18.6% in January compared to December, and starts were down 7.8% year-over-year compared to January 2018.

Single family starts were up 4.5% year-over-year, however multi-family starts were down 33.6%.

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 7.8% in January compared to January 2018.

The weakness in January was in the multi-family sector that is volatile month-to-month.

All things considered, this is a decent start to 2019.

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).

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.