Eye On Housing
The pace of single-family starts was effectively flat in July, after a strong rate was recorded in June. In contrast, the multifamily market continues to slow after multiple strong years.
Total starts declined almost 5% in July to a 1.155 million seasonally adjusted annual rate, according to the joint data release from the Census Bureau and HUD. The headline decline was mostly due to multifamily production decreases.
Single-family starts effectively held steady, falling slightly to an 856,000 seasonally adjusted rate in July. The February annualized rate, 877,000, was the fastest monthly pace since the Great Recession. Single-family starts are up almost 9% year-to-date compared to 2016 as limited existing inventory and solid builder confidence make for positive market conditions for additional building. This is right in line with forecast despite some monthly noise in the data.
Single-family permits were unchanged in July. However, on a year-to-date basis, single-family permits are 11% higher compared to this time in 2016, with more than 487,000 permits filed this year.
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.
Multifamily showed continued weakness as this market seeks a balance between supply and demand. Multifamily starts for 5+ unit properties were down 17% in July and are down 10% on a year-to-date basis. This decline is somewhat higher than forecast. The current data continue to confirm that 2015 was the peak year in this cycle for multifamily construction starts.
With respect to housing’s economic impact, 57% of homes under construction in July were multifamily (601,000). As noted in the graph above, with recent production declines for apartments, the current count of multifamily units is effectively unchanged from a year ago and is on a downward trend. There were 462,000 single-family units under construction, a gain of 7% from this time in 2016.
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