Slow & Steady, A Housing Starts Affair


The Census Bureau report released today shows that housing starts missed their estimates for last month, coming in at 1,287,000.  The previous report had a stronger-than-trend multifamily starts print. Typically, a strong print will be followed by a lower-than-trend print in the next month and this is what we see in the current report. Even though the headline numbers show a miss, the housing starts and permits story has stayed the same this entire cycle; the play is called Slow & Steady, A Housing Starts Affair. 

From Census:

May Housing starts cenus

From Census:

Building Permits:

Privately-owned housing units authorized by building permits in April were at a seasonally adjusted annual
rate of 1,352,000. This is 1.8 percent (±1.3 percent) below the revised March rate of 1,377,000, but is 7.7 percent (±0.9 percent) above the April 2017 rate of 1,255,000. Single-family authorizations in April were at a rate of 859,000; this is 0.9 percent (±1.4 percent)* above the revised March figure of 851,000. Authorizations of units in buildings with five units or more were at a rate of 450,000 in April.

Housing Starts:

Privately-owned housing starts in April were at a seasonally adjusted annual rate of 1,287,000. This is 3.7 percent (±11.4 percent)* below the revised March estimate of 1,336,000, but is 10.5 percent (±9.7 percent) above the April 2017 rate of 1,165,000. Single-family housing starts in April were at a rate of 894,000; this
is 0.1 percent (±11.8 percent)* above the revised March figure of 893,000. The April rate for units in buildings with five units or more was 374,000.

As we can see  in the chart below, starts for multifamily units declined compared to the strong numbers for the previous month.  Single family starts were meh in this report. However, single family start growth is up 8% year to date and 7.2%, year over year. A story that is being ignored is that multifamily construction is making a good comeback, on a year over year basis, from the downturn in 2017. We are seeing 18.7% year over year growth and 10% year to date growth.

From Calculated Risk:


Because housing starts have been slow in this cycle, we are not at risk for over-investment in this sector.  This means it still has legs to slowly walk higher.

From Doug Short:

May Starts

The number of construction job openings has been heading lower since the peak last year, but showed an increase in the current report. Total employment for construction is roughly 552,000 jobs away from what it was during the peak of the housing bubble years.

From BLS:


From Fred:

Construction employment

At a recent real estate investment conference, I stated that demographics in the U.S. are shifting in a way that is conducive to home ownership over renting. This doesn’t mean that I expect booming demand, but total housing starts will get to that “magical” number of 1,500,000, that everyone has been waiting to see since 2013.   I expect purchase applications will also finally get to the 21st century levels as well during that period.  This year, we have seen year over year growth in purchase applications even with higher home prices and higher mortgage rates, going into the heat months. This means that every single week of this year we have had positive year over year growth in this sector. Because the percentage of cash buyer is decreasing this year, the uptick in purchase applications may not translate into growth in total existing home sales. Still, the housing market is much stronger than it was in 2014 when mortgage rates were this high. I would still keep an eye out on new home sales going out to see if these higher rates cool down the solid rate of growth we have so far this year.

From Calculated Risk:


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

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