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Housing Starts Reach Post-Recession High in May as Permits Soften

Housing Starts Reach Post-Recession High in May as Permits Soften

In this recent article from the National Association of Home Builders, housing starts reached a post-recession high in May. Housing starts rose 5% to an adjusted annual rate of 1.35 million units - the highest since July 2007. Permits have dropped however, pointing to a decrease in future housing activity. Continue reading the full article below.

Housing Starts Reach Post-Recession High in May as Permits Soften

(NAHB), Total housing starts rose 5 percent in May to a seasonally adjusted annual rate of 1.35 million units, according to newly released data from the U.S. Department of Housing and Urban Development and the Commerce Department. This is the highest housing starts report since July 2007.

While housing production numbers rose, overall permits — which are a sign of future housing production activity — dropped 4.6 percent to 1.3 million units in May. Single-family permits fell 2.2 percent to 844,000 while multifamily permits fell 8.7 percent to 457,000.

“Ongoing job creation, positive demographics and tight existing home inventory should spur more single-family production in the months ahead,” said NAHB Chief Economist Robert Dietz. “However, the softening of single-family permits is consistent with our reports showing that builders are concerned over mounting construction costs, including the highly elevated prices of softwood lumber.”

The May reading of 1.35 million is the number of housing units builders would begin if they kept this pace for the next 12 months. Within this overall number, single-family starts rose 3.9 percent to 936,000 — the second highest reading since the Great Recession. Meanwhile, the multifamily sector — which includes apartment buildings and condos — rose 7.5 percent to 414,000 units.

Year-to-date, single-family and multifamily production are respectively 9.8 percent and 13.6 percent higher than their levels over the same period last year. The year-to-date metric can help compare performance data over a specific time period and show growth trends.

“We should see builders continue to increase production to meet growing consumer demand even as they grapple with stubborn supply-side constraints, particularly rising lumber costs,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La.

Regionally, the Midwest led the nation with a 62.2 percent increase in combined single- and multifamily housing starts. Starts fell 0.9 percent in the South, 4.1 percent in the West and 15 percent in the Northeast.

Looking at regional permit data, permits rose 42.1 percent in the Northeast and 7.2 percent in the Midwest. They fell 4.6 percent in the West and 13.9 percent in the South.

Multifamily Builders and Developers Remain Positive about the Apartment and Condo Market as Demand Continues

In this recent article from the National Association of Home Builders (NAHB), demand continues to boost confidence in the multi-family market.

Multifamily Builders and Developers Remain Positive about the Apartment and Condo Market as Demand Continues

(NAHB), 

Confidence in the multifamily housing market remained positive in the first quarter of 2018, according to the Multifamily Production Index (MPI) and the Multifamily Vacancy Index (MVI) released today by the National Association of Home Builders (NAHB). The MPI remained unchanged from last quarter, coming in at a reading of 53, while the MVI remained essentially unchanged at 42.

The MPI measures builder and developer sentiment about current conditions in the apartment and condo market on a scale of 0 to 100. The index and all of its components are scaled so that a number above 50 indicates that more respondents report conditions are improving than report conditions are getting worse.

The MPI is a weighted average of three key elements of the multifamily housing market: construction of low-rent units—apartments that are supported by low-income tax credits or other government subsidy programs; market-rate rental units—apartments that are built to be rented at the price the market will hold; and for-sale units—condominiums. The component measuring low-rent units edged down two points to 54, while the component measuring market rate rental units increased two points to 56 and the component measuring for-sale units remained even at 49.

The Multifamily Vacancy Index (MVI), which measures the multifamily housing industry's perception of vacancies, remained essentially unchanged with an increase of one point to 42. The MVI is a weighted average of current occupancy indexes for class A, B, and C multifamily units, and can vary from 0 to 100, where any number over 50 indicates more property managers report more vacant apartments. A reading of 42 is seen as a healthy number for the multifamily market.

“Multifamily builders and developers are reporting solid demand around the country, as shown in the vacancy rate for the first quarter,” said Steve Lawson, president of The Lawson Companies in Virginia Beach, Va., and chairman of NAHB’s Multifamily Council. “We anticipate steady demand through the rest of the year as household formations continue to grow.”

“The stability of multifamily builder confidence is consistent with NAHB’s view that the market has reached a healthy, sustainable level of production,” said NAHB Chief Economist Robert Dietz. “The overall strong economy is supporting demand and balancing supply-side issues many builders are facing, including shortages of labor and buildable lots, and the recent surge in lumber prices.”

Historically, the MPI and MVI have performed well as leading indicators of U.S. Census figures for multifamily starts and vacancy rates, providing information on likely movement in the Census figures one to three quarters in advance.

For data tables on the MPI and MVI, visit www.nahb.org/mms.

For more information on the NAHB Multifamily program, please visit NAHB Multifamily: https://www.nahb.org/en/members/committees-and-councils/councils/multifamily-council/nahb-multifamily.aspx.

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