Eye On Housing
Total housing starts declined in May after a few, strong early months to begin 2017. Total starts were down 5.5%, falling to a 1.092 million seasonally adjusted annual rate, according to the joint data release from the Census Bureau and HUD. Declines were recorded for both single-family and multifamily development.
Single-family starts fell back, declining to a 794,000 annual rate. The February annualized rate, 877,000, was the fastest monthly pace since the Great Recession. Nonetheless, single-family starts are up 7% year-to-date compared to 2016 as limited existing inventory and solid builder confidence make for positive demand conditions.
Single-family permits were down 4.9% in May. There has also been a noticeable increase in the number of single-family homes permitted but not started, consistent with survey data indicating supply-side bottlenecks. For example, in May there were 78,000 single-family homes permitted (on a seasonally adjusted basis) but not started construction. This is almost 15% higher than a year ago.
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 has weakened recently.
Multifamily starts dropped again in May for a fifth consecutive month of decline. Five-plus unit multifamily starts fell 10% to a 284,000 seasonally adjusted annual rate. Multifamily five-plus unit permits were also down, falling 10%. NAHB is forecasting that multifamily development will decline in 2017, although leveling off at elevated levels. The May data indicate that multifamily five-plus unit production is down 5.4% on a year-to-date basis.
With respect to housing’s economic impact, 57% of homes under construction in May were multifamily (612,000). This multifamily count is almost 6% higher than a year ago, although in recent months this total has flattened, consistent with our forecast. There were 455,000 single-family units under construction, a gain of 6% from this time in 2016. This is slightly lower than the April total (457,000), which was a post-recession high.
Regionally, single-family starts declined in the South (-8.9%) and the West (4.9%), the two largest market areas. Single-family starts were up in the Northeast (12.5%) and the Midwest (9.5%).
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