CALCULATEDRISK
By Bill McBride
From the Census Bureau: Permits, Starts and Completions
Housing Starts:
Privately-owned housing starts in August were at a seasonally adjusted annual rate of 1,356,000. This is 9.6 percent above the revised July estimate of 1,237,000 and is 3.9 percent above the August 2023 rate of 1,305,000. Single-family housing starts in August were at a rate of 992,000; this is 15.8 percent above the revised July figure of 857,000. The August rate for units in buildings with five units or more was 333,000.
Building Permits:
Privately-owned housing units authorized by building permits in August were at a seasonally adjusted annual rate of 1,475,000. This is 4.9 percent above the revised July rate of 1,406,000, but is 6.5 percent below the August 2023 rate of 1,578,000. Single-family authorizations in August were at a rate of 967,000; this is 2.8 percent above the revised July figure of 941,000. Authorizations of units in buildings with five units or more were at a rate of 451,000 in August.
emphasis added
The first graph shows single and multi-family housing starts since 2000 (including housing bubble).
Multi-family starts (blue, 2+ units) increased in August compared to July. Multi-family starts were up 5.5% year-over-year. Single-family starts (red) increased in August and were up 5,1% 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 from 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 August were above expectations and starts in June and July were revised slightly. A solid report.
The third graph shows the month-to-month comparison for total starts between 2023 (blue) and 2024 (red).
Total starts were up 3.9% in August compared to August 2023.
The YoY increase in August total starts was due to an increase in both multi-family and single-family starts.
Single family starts have been up year-over-year in 12 of the last 14 months, whereas multi-family has been up year-over-year in only 2 of last 14 months. Year-to-date (YTD), total starts are down 4.0% compared to the same period in 2023. Single family starts are up 10.4% YTD, and multi-family down 32.6% 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 down in August compared to July, 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 867 thousand multi-family units under construction. This is 154 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 1.509 million units under construction, 202 thousand below the all-time record of 1.711 million set in October 2022.
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 August were above expectations and starts in June and July were revised slightly. A solid report.
The expected weakness in multi-family starts began last summer, however 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.
We might see a pickup in single family activity as the Fed cuts rates.
“Thanks to lower interest rates, builders now have a positive view for future new home sales for the first time since May 2024,” said NAHB Chairman Carl Harris, a custom home builder from Wichita, Kan.