Total housing starts recorded a small decline in January, as multifamily starts fell back, albeit from an upwardly revised number in December. Total starts were down 2.6%, falling to a 1.246 million seasonally adjusted annual rate. However, single-family starts posted a small monthly increase in January, rising 1.9% to an 823,000 annual rate
As measured on a three-month moving average, the current changes are consistent with recent trends in the NAHB/Wells Fargo measure of single-family builder confidence. NAHB is forecasting continued growth for single-family construction over the course of 2017.
Multifamily development was the reason the headline starts number declined in January. Apartment starts in 5+ unit properties were down 7.9% for the month. Monthly volatility for multifamily starts has been a factor in the data since August. A surprise upward revision for December, to an annual rate of 457,000 starts for 5+ unit multifamily, meant a drop in January to what was a still solid 421,000 rate. Permits for multifamily in January also showed strength, consistent with our forecast of the multifamily development market leveling off at elevated levels of production.
Focusing on housing’s economic impact, in January 58% of homes under construction were multifamily (622,000). This multifamily count is 12% higher than a year ago. There were 447,000 single-family units under construction, a gain of 6% from this time in 2016. This is just slightly below the highest count of single-family units under construction since 2008 (450,000).
Regionally, single-family starts posted month-over-month gains in all regions except the West, where the pace of monthly construction was down almost 19% from the December rate. Single-family permits also posted a decline in the West of 17%. These numbers are worth noting as new homes are typically more expensive in the West, and competitive pricing is a key concern in 2017 as mortgage interest rates increase.
Today’s numbers are consistent with NAHB’s 2017 forecast, which indicates continued growth for single-family construction (limited by availability of workers and lots) and continued leveling off of multifamily production in the year ahead. Changes in building material prices are also an issue to watch.