The pace of housing construction weakened at the start of 2016, as total housing starts fell 3.8% in January, according to estimates from the Census Bureau and the U.S. Department of Housing and Urban Development.
The rate of single-family construction declined 3.9% from December to a seasonally adjusted annual rate of 731,000 units. The decline was consistent with the drop in home builder confidence, which fell three points to a level of 58 due to consumer worries about the state of the economy. Notable declines were seen in the West (down 10% from December’s pace) and the Northeast (down 14%). The Northeast drop may be attributable to a weather effect for the start of the year.
Multifamily starts (5-plus unit properties) were down 2.5% in January to a seasonally adjusted annual rate of 354,000.
Housing permits, a gauge of future building activity, were relatively flat in January. Single-family permit activity was off 1.6% for the month but up 9.6% on a year-over-year basis. Multifamily permits were up 1.1% for the month (and 17.9% higher year-over-year), despite a dramatic 75% drop in multifamily permits for the Northeast.
NAHB expects ongoing growth for single-family construction in 2016 despite the January dip. We are also forecasting slight growth for multifamily construction as the surge in rental demand continues. To see the progress of the ongoing home building recovery, consider the chart above which graphs the number of housing units currently under construction (on a seasonally adjusted basis).
For the single-family sector, there are currently 421,000 units under construction. This is 15% higher than the measure from January 2015. For multifamily production, there are currently 557,000 units in the pipeline, an increase of almost 19% on a year-over year basis. Of course, given that the average multifamily unit requires 11.7 months to complete from permit authorization, while the comparable number is approximately 7 months for single-family homes, it is not unexpected that this pipeline measurement would be weighted toward multifamily. Nonetheless, these data illustrate the room for potential growth for single-family construction in the years ahead.