Eye On Housing
The pace of single-family starts posted a slight gain in August, albeit over downwardly revised estimates of the rate of July construction. Nonetheless, the three-month moving average for single-family starts is at a post-recession high of 849,000 as the gradual recovery in home building continues.
Total starts declined almost 1% in August to a 1.180 million seasonally adjusted annual rate, according to the joint data release from the Census Bureau and HUD. The headline decline was due to multifamily production decreases, although the July multifamily reading was revised upward from a 299,000 pace to 352,000.
Single-family starts increased, rising slightly to an 851,000 seasonally adjusted rate in August. However, this gain was recorded over a downwardly revised estimate for July, initially reported as 856,00 and lowered to 838,00. 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.
Single-family permits declined slightly in August, falling 1.5%. However, on a year-to-date basis, single-family permits are nearly 11% higher compared to this time in 2016, representing an additional 54,400 permits for a total of 564,000 thus far this year. These 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. However, we can expect volatility ahead, as the counties affected by Hurricanes Harvey and Irma represent about 14% of national single-family production. The HMI was down in the most recent reading on overall concerns with respect to hurricane-related delays.
Multifamily starts declined in August from an upwardly revised July estimate, as the market seeks a balance between supply and demand. Multifamily starts were down almost 7% in August and five-plus unit production is down 10% on a year-to-date basis. This decline is somewhat larger than forecast. However, multifamily permits jumped in August, resulting in the year-to-date permit total actually being 1% higher than 2016. On the whole, 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, 56% of homes under construction in August were multifamily (610,000). 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. There were 472,000 single-family units under construction, a gain of 11% from this time in 2016.
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