The housing starts report this morning was above consensus, and there were upward revisions to the prior three months. However starts were down 1.7% from April 2015, but April was strong last year (see the first graph).
The key take away from the report is that multi-family is slowing, and single family growth is ongoing year-over-year.
This graph shows the month to month comparison between 2015 (blue) and 2016 (red).
The comparison for April was more difficult than in February and March.
Year-to-date starts are up 10.2% compared to the same period in 2015, but that will slow further with the more difficult comparisons for the remainder of the year.
Multi-family starts are down 2.3% year-to-date, and single-family starts are up 16.8% year-to-date.
Below is an update to the 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 rolling 12 month total for starts (blue line) increased steadily over the last few years, and completions (red line) have lagged behind – but completions have been catching up (more deliveries), and will continue to follow starts up (completions lag starts by about 12 months).
Multi-family completions are increasing sharply year-over-year.
I think most of the growth in multi-family starts is probably behind us – in fact multi-family starts probably peaked in June 2015 (at 510 thousand SAAR) – although I expect solid multi-family starts for a few more years (based on demographics).
The second 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. The blue line is for single family starts and the red line is for single family completions.
Note the exceptionally low level of single family starts and completions. The “wide bottom” was what I was forecasting several years ago, and now I expect several years of increasing single family starts and completions.
The housing recovery continues, but I expect most of the growth will be from single family going forward.