Data shows multi-family starts lost steam and tighter markets could be ahead
Housing starts were lower overall in June but the single-family sector posted a slight increase.
But there could be tighter conditions ahead for homebuyers as permits were also lower, although they have shown increases in recent months.
The total reported by the HUD and Commerce Dept. was down 0.9% to a seasonally adjusted annual rate of 1.25 million units, with single-family starts up 3.5% to 847,000 units while the multifamily sector fell 9.2% to a 406,000 pace.
“The relatively flat housing starts data in June is due to a decline in multifamily production, which still remains somewhat elevated due to affordability concerns in the for-sale market,” said NAHB Chief Economist Robert Dietz. “The Census data show that the only region showing single-family construction gains for the first half of 2019 is the South, where housing is generally more affordable relative to incomes.”
Combined single-family and multifamily starts in June rose 31.3% in the Northeast, and 27.1% in the Midwest. Starts declined 9.2% in the South and 4.9% in the West.
Supply challenges?
Permits were down 6.1 percent to a SAAR of 1.22 million units, which could signal supply challenges ahead.
“Restrictive and costly regulations, rising construction costs and an ongoing labor shortage in the construction industry continue to put pressure on builders. If these supply headwinds persist, buyers looking for homes may be facing a tighter market in the second half of the year,” commented First American Deputy Chief Economist Odeta Kushi.
She added that there are some reasons for builders to be optimistic including pent up demand, lower mortgage rates and continued wage growth.
“However, supply remains tight and building pace lags behind historical standards, especially for single-family homes. Market conditions are ripe for buyers to face more competition in the second half of the year,” she said.
