NAHB says strong gain tracks builder confidence in the market
There was a significant increase in single-family home starts in January according to the latest data from the HUD and US Commerce Department.
The combined single-family and multifamily seasonally-adjusted annual rate of 1.23 million was up 18.6% from a downwardly-revised December reading.
This was led by a 25.1% surge for single-family starts (926,000 units) while multifamily gained by a more modest 2.4% (304,000).
“The bounce back in single-family starts mirrors our builder confidence surveys, as sentiment fell in the latter part of 2018 but rebounded in January after mortgage rates showed a notable decline,” said Greg Ugalde, chairman of the National Association of Home Builders.
Regionally, combined single-family and multifamily starts in January rose 58.5% in the Northeast, 29.3% in the West and 13.8% in the South. Starts fell 5.7% in the Midwest.
Permit issuance was disappointing
Despite the positive news on starts, NAHB’s chief economist Robert Dietz added that builders remain cautious as single-family permit numbers for January declined 2.1% in January.
“Some single-family projects that were on pause in December, meaning they were authorized but not started, went online in January. However, builders remain cautious as single-family permit numbers in January were somewhat soft,” he said.
Single-family permits totaled 812,000, the lowest since August 2017, while multifamily permits increased 7.2% to 533,000, boosting the overall total to 1.35 million in January, up 1.4%.
Completions rise, labor shortages remain
There was a 2.1% increase in completions in January compared to a year earlier but Mark Fleming, chief economist of First American estimates that over one million new households were created in 2018, adding to the demand for housing.
“Yet, according to January 2019 year-over-year data, only 862,000 new housing units were completed – the net number of units completed when accounting for single-family dwellings, apartments, manufactured homes and obsolescence,” he said. “This leaves a shortage of over 680,000 housing units today. January’s year-over-year growth in completions will help bridge this gap between supply and demand.”
The issue of shortages is exacerbated though by a further decline in construction labor as shown in the latest February employment situation data.
“Homebuilding still requires manual labor as a key input into the production process. It’s very hard to have one, housing starts, without the other, residential construction employment,” added Fleming. “This month’s decline in construction employment is yet another headwind for new home construction, suppressing the critical need to build more homes and alleviate the housing supply shortage.”
