Single-Family Starts Expand in August

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Single-family starts showed continued growth in August but overall housing production fell 5.1 percent to a seasonally adjusted annual rate of 1.42 million units due to a double-digit percentage decline in multifamily production, according to data from the U.S. Housing and Urban Development and Commerce Departments.

The pace of single-family starts in August was the highest production rate since February. Single-family starts increased 4.1 percent to a 1.02 million seasonally adjusted annual rate. The August reading of starts was consistent with surging builder confidence, as single-family building rose to meet rising buyer traffic, supported by low interest rates. However, builders continue to face concerns in terms of rising lumber prices and supply chain shortages of other building materials.

The multifamily sector, which includes apartment buildings and condos (96% built-for-rent currently), decreased 22.7 percent to a 395,000 pace. The weakness for multifamily development is consistent with our forecast, however it is worth noting that actual construction starts for 5+ unit apartments are up almost 9% thus far in 2020. This measure will slow during the second half of the year.

 

Total housing starts were down in August on the decline for multifamily construction, with multifamily 5+ unit permits now down 8.3% on a year-to-date basis. Single-family permits continue to rise and are now up almost 7% on a year-to-date basis.

As an indicator of the strength of the housing rebound, there are now 521,000 single-family homes under construction. This is 1% higher than a year ago, despite the declines for construction starts in the Spring. At its peak level of decline in April, single-family starts were down 34% compared to the pre-recession peak in February.

There are currently 690,000 apartments under construction, a post-Great Recession high mark. This count will slow in the months ahead.

Material cost increases and shortages are having an impact on the construction pipeline. For August, the count of single-family homes that have an authorized permit but have not started construction totaled 99,000, a 15% increase compared to a year ago. Builders are reporting growing delays due to these supply-chain issues.

On a regional and year-to-date basis (January through August of 2020 compared to that same time frame a year ago), combined single-family and multifamily starts are 13.6 percent higher in the Midwest, 5.4 percent higher in the South, 3.8 percent higher in the West and 4.5 percent lower in the Northeast.

Overall permits decreased 0.9 percent to a 1.47 million unit annualized rate in August. Single-family permits increased 6.0 percent to a 1.04 million unit rate. Multifamily permits decreased 14.2 percent to a 434,000 pace.

Looking at regional permit data on a year-to-date basis, permits are 2.6 percent higher in the Midwest, 4.8 percent higher in the South, 8.2 percent lower in the Northeast and 1.3 percent lower in the West.



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