CALCULATEDRISK
By Bill McBride
From the Census Bureau: Permits, Starts and Completions
Housing Starts:
Privately-owned housing starts in September were at a seasonally adjusted annual rate of 1,354,000. This is 0.5 percent below the revised August estimate of 1,361,000 and is 0.7 percent below the September 2023 rate of 1,363,000. Single-family housing starts in September were at a rate of 1,027,000; this is 2.7 percent above the revised August figure of 1,000,000. The September rate for units in buildings with five units or more was 317,000.
Building Permits:
Privately-owned housing units authorized by building permits in September were at a seasonally adjusted annual rate of 1,428,000. This is 2.9 percent below the revised August rate of 1,470,000 and is 5.7 percent below the September 2023 rate of 1,515,000. Single-family authorizations in September were at a rate of 970,000; this is 0.3 percent above the revised August figure of 967,000. Authorizations of units in buildings with five units or more were at a rate of 398,000 in September.
The first graph shows single and multi-family housing starts since 2000 (including housing bubble).
Multi-family starts (blue, 2+ units) decreased in September compared to August. Multi-family starts were down 16.2% year-over-year. Single-family starts (red) increased in September and were up 5.5% year-over-year.
Note that the weakness in 2022 and early 2023 had been in single family starts (red), then the weakness moved to multi-family. Single family bounced back in August and September from the weak level in July, and multi-family starts might have bottomed earlier this year.
The second graph shows single and multi-family starts since 1968. This shows the huge collapse following the housing bubble, and then the eventual recovery – and the recent weakness.
Total housing starts in September were slightly above expectations and starts in July and August were revised up. A solid report.
The third graph shows the month-to-month comparison for total starts between 2023 (blue) and 2024 (red).
Total starts were down 0.7% in September compared to September 2023. The YoY decrease in September total starts was due weakness in multi-family starts.
Single family starts have been up year-over-year in 13 of the last 15 months, whereas multi-family has been up year-over-year in only 1 of last 15 months. Year-to-date (YTD), total starts are down 3.4% compared to the same period in 2023. Single family starts are up 10.1% YTD, and multi-family down 30.6% YTD.
Multi-Family Housing Units Under Construction Continue to Decline
The fourth graph shows housing starts under construction, Seasonally Adjusted (SA).
Red is single family units. Currently there are 642 thousand single family units (red) under construction (SA). This was up slightly in September compared to August, and 188 thousand below the pandemic peak in May 2022. Single family units under construction peaked in 2022 since supply chain constraints eased.
Blue is for 2+ units. Currently there are 842 thousand multi-family units under construction. This is 179 thousand below the record set in July 2023 of 1,021 thousand. For multi-family, construction delays had been a significant factor, but multi-family units under construction have peaked and will decline significantly in 2024.
Combined, there are 1.484 million units under construction, 227 thousand below the all-time record of 1.711 million set in October 2022 and the fewest since October 2021.
Comparing Starts and Completions
Below is a graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market and starts are important because that is future new supply (units under construction is also important for employment).
These graphs use a 12-month rolling total for NSA starts and completions.
The blue line is for multifamily starts and the red line is for multifamily completions. Builders are now completing many more multifamily housing units than they are starting on a 12-month basis. Multifamily starts will likely decline a little further on a rolling 12-month basis, and completions will increase over the next year.
The last graph shows single family starts and completions. It usually only takes about 6 months between starting a single-family home and completion – so the lines are much closer than for multi-family. The blue line is for single family starts and the red line is for single family completions.
Builders are now starting about the same number of single-family homes as they are completing on a 12-month basis.
Conclusions
Total housing starts in September were slightly above expectations and starts in July and August were revised up. A solid report.
The expected weakness in multi-family starts began last summer and it appears multi-family starts are at a bottom. I’ll be watching leading indicators, such as the National Multifamily Housing Council’s (NMHC’s) Quarterly Survey of Apartment Market Conditions and the Architectural Billings Index for any signs of a pickup in the multi-family sector.