Thursday, October 17, 2019

Comments on September Housing Starts

by Calculated Risk on 10/17/2019 01:12:00 PM

Earlier: Housing Starts decreased to 1.256 Million Annual Rate in September

Total housing starts in September were below expectations, however starts for July and August were revised up combined.

The housing starts report showed starts were down 9.4% in September compared to August, and starts were up 1.6% year-over-year compared to September 2018.

Single family starts were up 4.3% year-over-year, and multi-family starts were down 5.8% YoY.   Much of the weakness this month was in the volatile multi-family sector, still - overall - this was a decent report.

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

Starts Housing 2018 and 2019Click on graph for larger image.

Starts were up 1.6% in September compared to September 2018.

Year-to-date, starts are down 1.3% 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 Q4 comparisons will be easier.

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 seems likely starts will be up 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 - then completions caught up with starts.

As I've been noting for several 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.