Tuesday, June 18, 2019

Comments on May Housing Starts

by Calculated Risk on 6/18/2019 10:35:00 AM

Earlier: Housing Starts at 1.269 Million Annual Rate in May

Total housing starts in May were above expectations, and starts for March and April were revised up.

The housing starts report showed starts were down 0.9% in May compared to April, and starts were down 4.7% year-over-year compared to May 2018.

Single family starts were down 12.5% year-over-year, and multi-family starts were up 13.8%.

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 4.7% in May compared to May 2018.

Year-to-date, starts are down 5.3% compared to the same period in 2018.

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

My guess was starts would be down slightly year-over-year in 2019 compared to 2018, but nothing like the YoY declines we saw in February and March. Now it looks like starts might be up slightly in 2019 compared to 2018.

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.