Tuesday, October 20, 2020

Comments on September Housing Starts

by Calculated Risk on 10/20/2020 08:56:00 AM

Earlier: Housing Starts at 1.415 Million Annual Rate in September

Total housing starts in September were below expectations, and starts in July and August were revised down. The weakness in September was due to the volatile multi-family sector (apartments are under  pressure from COVID).

The housing starts report showed starts were up 1.9% in September compared to August, and starts were up 11.1% year-over-year compared to September 2019.

Single family starts were up 22% year-over-year.  Low mortgage rates and limited existing home inventory have given a boost to single family housing starts.

The 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 11.1% in September compared to September 2019.

Last year, in 2019, starts picked up towards the end of the year, so the comparisons were easy in the first seven months of the year..

Starts, year-to-date, are up 5.5% compared to the same period in 2019. This is below my forecast for 2020, but I didn't expect a pandemic!

I expect starts to remain solid, but the growth rate will slow.

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 - then mostly moved sideways.  Completions (red line) had lagged behind - then completions caught up with starts- then starts picked up a little again late last year, but have fallen off the pandemic.

Single family Starts and completionsThe last 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.