Wednesday, March 18, 2020

Comments on February Housing Starts

by Calculated Risk on 3/18/2020 09:01:00 AM

This was all pre-crisis.   This will change sharply soon, and housing starts will collapse for the duration of the crisis.

Earlier: Housing Starts decreased to 1.599 Million Annual Rate in February

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

The housing starts report showed starts were down 1.5% in February compared to January (only because January was revised up), and starts were up 39.2% year-over-year compared to February 2019.

These were strong numbers!   Starts in January were revised up to the highest level for starts since December 2006 (end of the bubble).  However, the weather was very nice again in February (just like in December and January), and the weather probably had an impact on the seasonally adjusted housing starts number.

Single family starts were up 35.4% year-over-year, and multi-family starts were up 44.3% YoY.

This first graph shows the month to month comparison for total starts between 2019 (blue) and 2020 (red).

Starts Housing 2019 and 2020Click on graph for larger image.

Starts were up 39.2% in February compared to February 2019.

Last year, in 2019, starts picked up in the 2nd half of the year, so the comparisons are easy early in the year.

Starts will collapse over the next few months due to COVID-19.

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 once the crisis ends.