Single-Family Starts Flat in May


The May pace of single-family housing starts was effectively flat relative to April after downward revisions for prior months, standing at a seasonally adjusted annual rate of 764,000. However, according to estimates from the Census Bureau and the Department of Housing and Urban Development, the May rate marks a 10% gain in the pace of single-family construction on a year-over-year basis.

Yesterday’s increase in the NAHB/Wells Fargo Housing Market Index suggests the industry will expand single-family home construction in the months ahead.


On a three-month moving average basis, single-family starts ticked down due to the elevated construction pace recorded in February. While NAHB expects growth in single-family construction due to favorable demographics, lot supplies are a growing challenge holding back production, particularly in markets in the West and Northeast.

Multifamily starts (2+ unit production) came in at a 400,000 pace on a seasonally adjusted annual basis, showing surprising strength and up 8% on a year-over-year basis. However, the pace of multifamily permits is down almost 28% on year-over-year basis as of May. This is consistent with the NAHB forecast, which shows a smaller total of multifamily starts for this year compared to 2015.

Regionally, expansion has been particularly strong in the South, where single-family starts for April are 17% higher than a year ago. On a non-seasonally adjusted basis, 55% of single-family starts for the month were located in the South.

There has been some weakening in the West, where single-family starts are down almost 5% on a year-over-year basis. Access to lots is a key concern. The Midwest showed a monthly drop of 15%, but on a year-over-year basis single-family start are 8% higher. Single-family construction is up almost 13% in the Northeast.

units under production

Taking the long view, an examination of the count of homes currently under construction provides the degree of market mix and momentum of the recovery in home construction. As of May, 56% of units under construction in the nation were multifamily (574,000), a 16% gain in the total from a year earlier.

There were 435,000 single-family homes under construction in May, which is 17% higher than May 2015. This is the highest count since October 2008 and is an indicator that growth in home construction is a key bright spot in the overall economy, given the lackluster GDP measure for the first quarter.

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  1. Meanwhile global securities are tanking. Jobs report weighing. S&P slid back from record high. Ichan shorting S&P. Soros buying gold. Buffett saying low interest makes him pay more for a security (hinting at bubble). Volatility index (VIX) is extreme. Central banks policies in the US and abroad failing to meet target inflation, instead facing deflation, even with negative interest. Energy tanking. Brexit. Shootings. Political assassinations. Obviously the big picture fundamentals are going to catch up with housing eventually, the only strong sector of the global economy is US housing. Gold & silver have been doing quite well. That said, housing is a very tangible security, and the US economy has been surprisingly resilient when the global economy is in a full blown recession. Lots of foreign investors looking to the US for a hedge right now. Great time to be an American. We are blessed. US wealth at an all time high. Begs the question: is the wealth real, or a bubble? Time will tell.

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