Eye On Housing
The July pace of total housing starts increased 2.1% over the June rate, led by strength in the multifamily sector. However, year-to-date measures continue to be consistent with the NAHB forecast of growth for single-family construction this year, as well as a slight dip for apartment development compared to 2015 levels.
According to estimates from the Census Bureau and the Department of Housing and Urban Development, single-family starts increased just 0.5% to a 770,000 seasonally adjusted annual rate in July. Year-to-date, single-family housing starts are running almost 11% higher than the year-to-date total for July of 2015.
However, there has been some slackening of single-family permit growth. Single-family permits declined almost 4% from June to July, although authorizations remain stronger than the July 2015 rate (up 2.4%). On a year-to-date basis, single-family permits from January to July of 2016 are more than 7% higher than this time in 2015.
Multifamily starts (units in 2+ properties) led the way in July, increasing to a 441,000 seasonally adjusted annual rate, which is 5% higher than the June pace. Despite the jump in July, multifamily permits on a year-to-date basis now stand just under 1% lower than the total from this time in 2015.
Taken together, these trends are consistent with the NAHB forecast, which sees gathering strength for single-family construction and a leveling off of multifamily production as the market finds a balance between housing demand and supply.
Regionally, single-family starts fell back in the Northeast in July after a strong June, declining almost 24% on a monthly basis. The Midwest also showed some weakening, declining almost 3% on a monthly basis. In contrast, single-family starts were up in those parts of the country that have the most home construction. Single-family starts were up almost 4% in the South and 5% in the West.
On a year-to-date basis, however, all regions have posted year-to-date gains however. Single-family starts are up 15% in the Northeast, 15% in the Midwest, 12% in the South and 3% in the West when comparing the July 2016 year-to-date total relative to the comparable July 2015 year-to-date totals.
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 July, 58% of units under construction in the nation were multifamily (605,000), a 17% gain in the total from a year earlier.
There were 432,000 single-family homes under construction in July, which is 12% higher than July 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.
I may be reading too much into this but the growth of multifamily and the decline of approximately 25% in the number of first-time buyers participating in the purchase market leads me to believe that recovery is still a very long way off. We know that the market cannot fully recover without its single largest component but it appears nothing is being done to determine why and to fix it.