Housing Starts: A few Comments and Quarterly Housing Starts by Intent

A few comments:

• Overall the housing starts report was a little disappointing. Even just looking at single family starts (removing the volatile multi-family sector), starts were down 2.1% from March. However single family starts were up 20.8% year-over-year, and that is a solid increase.

• Even with this significant year-over-year increase, housing starts are still very low. Starts averaged 1.5 million per year from 1959 through 2000, and demographics and household formation suggests starts will return to close to that level over the next few years. This suggests significantly more growth in housing starts over the next few years.

• The Census Bureau (last graph below) released the quarterly report for starts by intent. Single family starts, built for sale were up about 39% compared to Q1 2012. That is a very strong increase.

Here 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.

Click on graph for larger image.

The blue line is for multifamily starts and the red line is for multifamily completions.

The rolling 12 month total for starts (blue line) has been increasing steadily, and completions (red line) is lagging behind - but completions will follow starts up (completions lag starts by about 12 months).

This means there will be an increase in multi-family deliveries this year.  The level of multi-family starts over the last 12 months - almost to the level in late '90s and early 00's - suggests that future growth in starts will mostly come from single family starts.

The 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.

Starts are moving up and completions are following.  Usually single family starts bounce back quickly after a recession, but not this time because of the large overhang of existing housing units. 

Note the low level of single family starts and completions.  The "wide bottom" was what I was forecasting several years ago, and now I expect several years of increasing single family starts and completions.

The Census Bureau also released the Q1 "Started and Completed by Purpose of Construction" report this morning.  The following  shows the NSA quarterly intent for four start categories since 1975: single family built for sale, owner built (includes contractor built for owner), starts built for rent, and condos built for sale.

Single family starts built for sale were up about 39% compared to Q1 2012. This is a significant increase, but still very low, and not even back to 2008 levels.

Owner built starts were basically unchanged from Q1 2012, and condos built for sale are just above the record low.

The 'units built for rent' have increased significantly and are up about 50% year-over-year.