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Tuesday, May 18, 2021

Comments on April Housing Starts

by Calculated Risk on 5/18/2021 10:39:00 AM

Earlier: Housing Starts decreased to 1.569 Million Annual Rate in April

It is possible that supply constraints held back housing starts in April. Here is a comment from MBA SVP and Chief Economist Mike Fratantoni:

“Single-family starts in April dropped more than 13% compared to last month, but permits to build single-family homes saw a smaller decline. This is consistent with reports that builders are delaying starting new construction because of the marked increase in costs for lumber and other inputs. Moreover, builders are also reporting difficulty obtaining other inputs like appliances."
Total housing starts in April were below expectations, and starts in February and March were revised down slightly. Single family starts decreased in April, but were up 59% year-over-year (starts declined at the beginning of the pandemic). 

The volatile multi-family sector is up sharply year-over-year (apartments were under pressure from COVID).

The housing starts report showed total starts were down 9.5% in April compared to March, and total starts were up 67.3% year-over-year compared to April 2020.

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 2020 (blue) and 2021 (red). 

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

Starts were up 67.3% in April compared to April 2020.  The year-over-year comparison will be easy again in May and June.  

2020 was off to a strong start before the pandemic, and with low interest rates and little competing existing home inventory, starts finished 2020 strong.  Starts have started 2021 strong (February was impacted by the harsh weather).

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 with 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, but I still expect some further increases in single family starts and completions on a rolling 12 month basis - especially given the low level of existing home inventory.