According to estimates from the Housing and Urban Development and Commerce Departments, single-family starts expanded in February. Construction activity was accelerated earlier in the year due to warmer weather. Despite the strong start for 2020, significant and rising headwinds exist for housing construction due to coronavirus mitigation efforts.
The three-month moving average for single-family construction is currently at a post-recession high. Single-family starts increased 6.7% to a 1,072,000 seasonally adjusted annual pace in February. Multifamily starts for units in 5+ unit properties declined 17% to a 508,000 annualized rate after a strong yet unsustainable start for 2020 for apartment construction.
As of February 2020, there were 539,000 single-family homes under construction. This is roughly flat from a year ago (541,000). Declines for single-family construction in early 2019 have been regained in terms of current construction activity. There are currently 683,000 apartments under construction, up 12% from a year ago and marking a post-Great Recession high. The cumulative economic impact of the 2019 rebound in home construction is seen in the graph below.
Construction activity will face significant headwinds in the months ahead given the economic impact of mitigation strategies that are placing on pause large segments of the U.S. economy.