Eye On Housing
Total housing starts declined in April after strong early months in 2017. Total starts were down almost 3%, falling to a 1.172 million seasonally adjusted annual rate, according to the joint data release from the Census Bureau and HUD. This decrease was due to a multifamily production decline, although single-family permit activity was also softer than expected in April.
Single-family starts were effectively flat, rising slightly to an 835,000 annual rate. The February annualized rate, 877,000, was the fastest monthly pace since the Great Recession, while the April rate ranks fourth. Single-family starts are up 7% year-to-date compared to 2016.
However, single-family permits were down 4.5% in April, particularly due to permitting declines in the South (down almost 8%). The South had a strong start for the year, and we are now seeing a slight pullback.
As measured on a three-month moving average, the data are consistent with recent trends in the NAHB/Wells Fargo measure of single-family builder confidence and NAHB’s forecast of modest single-family construction growth in 2017. The three-month moving average of single-family starts reached a post-recession high in April, and NAHB is forecasting continued growth for the sector as the year progresses. However, due to the strong February number, the rolling average may flatten in the next month or two.
Multifamily starts declined again in April for the fifth consecutive month. Total multifamily starts fell 9% to a 337,000 seasonally adjusted annual rate. Multifamily permits were effectively flat. NAHB is forecasting that multifamily development will continue to level off over the course of 2017.
Focusing on housing’s economic impact, 57% of homes under construction in April were multifamily (617,000). This multifamily count is almost 9% higher than a year ago, although in recent months this total has flattened, consistent with our forecast. There were 457,000 single-family units under construction, a gain of almost 7% from this time in 2016. This is the highest count of single-family units under construction since the summer of 2008.
Regionally, single-family starts posted in April a 29% decline in the Northeast (smaller market with more volatile data), 3% decline in the South, a 9% gain in the West and a 19% jump in the Midwest, all on a monthly basis.
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 this year. The soft single-family permit numbers in April appear to have been concentrated in the South, although there were small declines in the Northeast and the Midwest as well. Builder confidence levels suggest this is a monthly deviation from the overall slow growth trend.
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