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Thursday, December 17, 2020

Comments on November Housing Starts

by Calculated Risk on 12/17/2020 03:16:00 PM

Earlier: Housing Starts increased to 1.547 Million Annual Rate in November

Total housing starts in November were slightly above expectations, however starts in September and October were revised down, combined. The single family sectors has increased sharply, but the volatile multi-family sector is down year-over-year (apartments are under  pressure from COVID).

The housing starts report showed starts were up 1.2% in November compared to October, and starts were up 12.8% year-over-year compared to November 2019.

Single family starts were up 27% 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).

A key point: Housing starts averaged 1.590 million SAAR in the three months prior to the pandemic! That is higher than the last couple of months. 2020 was off to a strong start, and with low interest rates and little competing inventory, starts are solid.

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

Starts were up 12.8% in November compared to November 2019.

Last year, in 2019, starts picked up at the end of the year - and were strong in early 2020 - so the comparison next month will be more difficult.  Don't be surprised if starts are down year-over-year sometime over the next few months.

Starts, year-to-date, are up 7.0% compared to the same period in 2019. This is close to my forecast for 2020, although 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.

Single family starts are getting back to more normal levels, and  I expect some further increases in single family starts and completions on rolling 12 month basis.