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Friday, January 17, 2020

Comments on December Housing Starts

by Calculated Risk on 1/17/2020 12:22:00 PM

Earlier: Housing Starts increased to 1.608 Million Annual Rate in December

Total housing starts in December were well above expectations and revisions to prior months were positive.

The housing starts report showed starts were up 16.9% in December compared to November, and starts were up 40.8% year-over-year compared to December 2018.

These were blow out numbers! This was the highest level for starts since December 2006 (end of the bubble). However, the weather was very nice in December, and the weather probably had a significant impact on the seasonally adjusted housing starts number. The winter months of December and January have the largest seasonal factors, so nice weather can really have an impact. Note that Permits were more inline with expectations (still solid).

Single family starts were up 29.6% year-over-year, and multi-family starts were up 74.6% YoY.

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 40.8% in December compared to December 2018.

For the year, starts were up 3.2% compared to 2018.

Last year, in 2018, starts were strong early in the year, and then fell off in the 2nd half - so the comparison was easy in December.

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- although starts are picking up a little again.

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.