Housing Starts Grow With Monthly Supply Growth

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The Census Bureau report released today shows that housing starts are continuing on their slow and steady pace.  The strong growth in the multifamily sector means we should expect multifamily starts to come in lower next month while single family starts continue to crawl along at the slow rate of growth. This is very similar to new home sales. It is noteworthy that the monthly supply for new homes is deviating from that for existing homes. New home sales are just as slow and steady as housing starts and this is why you haven’t seen more construction.

From Fred:
https://research.stlouisfed.org/publications/economic-synopses/2018/04/10/the-housing-supply-puzzle-part-1-divergent-markets?

APRIL 2018 MOTHER OF INVENTORY DATA

From Doug Short:
https://www.advisorperspectives.com/dshort/updates/2018/03/26/new-home-sales-down-0-6-in-february

Marrch New home sales

From Census:  https://www.census.gov/construction/nrc/pdf/newresconst.pdf

Housing Starts:

Privately-owned housing starts in March were at a seasonally adjusted annual rate of 1,319,000. This is 1.9
percent (±12.4 percent)* above the revised February estimate of 1,295,000 and is 10.9 percent (±10.0
percent) above the March 2017 rate of 1,189,000. Single-family housing starts in March were at a rate of
867,000; this is 3.7 percent (±11.8 percent)* below the revised February figure of 900,000. The March rate
for units in buildings with five units or more was 439,000.

Building Permits:

Privately-owned housing units authorized by building permits in March were at a seasonally adjusted annual rate of 1,354,000. This is 2.5 percent (±1.4 percent) above the revised February rate of 1,321,000 and is 7.5 percent (±1.4 percent) above the March 2017 rate of 1,260,000. Single-family authorizations in March were at a rate of 840,000; this is 5.5 percent (±1.5 percent) below the revised February figure of 889,000.
Authorizations of units in buildings with five units or more were at a rate of 473,000 in March.

This report showed better growth for multifamily rather than single family homes, which on occasion has happened before. But, typically, multifamily growth falls back in the next month while single family starts recover. 

From Calculated Risk:
http://www.calculatedriskblog.com/2018/04/housing-starts-increased-to-1319.html

StartsShortMar2018

We have recently hired a lot construction workers, and this drew down the monthly job openings for this sector.  The number of construction job openings has been heading lower since the peak of last year. We saw high demand for workers in certain areas after the hurricanes . For some context, we are roughly 575,000 construction workers away from what we had at the peak of the housing bubble in terms of total construction employment.

From BLS:
https://www.bls.gov/charts/job-openings-and-labor-turnover/unemp-per-job-opening.htm#

April JOLTS Construction
From Fred: 
https://fred.stlouisfed.org/series/USCONS
April Construction employment

Single family starts, the key for total housing start data, grew 5.2% year over year. If this data line goes negative this would imply that the trend in new home sales is trending negative. However, both housing starts and new home sales are still historically low and should have legs for slow growth.

From Doug Short:
https://www.advisorperspectives.com/dshort/updates/2018/04/17/new-residential-housing-starts-up-in-march

April Housing Starts Pop

All in all a decent report, as long as you understand why construction is slow in this cycle you won’t be confused by the slow and steady growth. This is a demand story not a supply one.

Logan Mohtashami is a financial writer and blogger covering the U.S. economy with a specialization in the housing marketLogan Mohtashami is a senior loan officer at AMC Lending Group,  which has been providing mortgage services for California residents since 1987. Logan also tracks all economic data  daily on his own facebook page https://www.facebook.com/Logan.Mohtashami

About Logan Mohtashami:

https://loganmohtashami.com/about/