Single-family Construction Up Again

Single-family housing starts increased 4.4% in December to a seasonally-adjusted annual rate of 470,000, the best monthly number since May 2010 when the home buyer tax credit ended. Total housing starts dropped 4.1% due entirely to a realignment of multifamily starts from November’s unsustainable level of 235,000. Multifamily starts (buildings with two or more units) fell to 187,000 or down 20.4%. Multifamily construction exhibited a saw-toothed pattern for much of 2011 but still came in 55% better than 2010.
Total permits were essentially unchanged with the same opposing trends between single-family and multifamily. Single-family permits rose 1.8% to the highest monthly level in 2011 while multifamily permits fell 3.7% from an unusually high November level. Regionally, single-family construction rose in all regions except the Northeast where the November levels spiked and readjusted to a more sustainable level in December.
The relatively positive end to 2011 for single-family construction did not overcome the poor start and the year comes in at the worst since the early 1940s at 428,600 homes. The previous low was 2009 at 445,000. The lowest monthly rate on record remains January 2009 at 360,000. The significant improvement in multifamily throughout 2011 brings total housing starts for the year to 606,900, a 3.4% increase over 2010.
Total housing starts three-month moving average has increased for eight months and that trend is expected to continue into 2012 for an annual rate of increase around 17%. The absolute levels of housing construction remain below half of normal and a true return to the underlying demographically driven demand for additional housing of about 1.7 million homes is still several years away.