August Housing Starts: Record Number of Housing Units Under Construction

Housing Starts Increased to 1.575 million Annual Rate in August

From the Census Bureau: Permits, Starts and Completions

Housing Starts:

Privately‐owned housing starts in August were at a seasonally adjusted annual rate of 1,575,000. This is 12.2 percent above the revised July estimate of 1,404,000, but is 0.1 percent below the August 2021 rate of 1,576,000. Single‐family housing starts in August were at a rate of 935,000; this is 3.4 percent above the revised July figure of 904,000. The August rate for units in buildings with five units or more was 621,000.

Building Permits:

Privately‐owned housing units authorized by building permits in August were at a seasonally adjusted annual rate of 1,517,000. This is 10.0 percent below the revised July rate of 1,685,000 and is 14.4 percent below the August 2021 rate of 1,772,000. Single‐family authorizations in August were at a rate of 899,000; this is 3.5 percent below the revised July figure of 932,000. Authorizations of units in buildings with five units or more were at a rate of 571,000 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 33.1% year-over-year in August. Single-family starts (red) increased in August and were down 14.6% year-over-year.

Note that the recent weakness is in single family starts (red).

The second graph shows single and multi-family starts since 1968.

The second graph shows the huge collapse following the housing bubble, and then the eventual recovery. Total housing starts in August were above expectations, however, starts in June and July were revised down, combined.

The third graph shows the month-to-month comparison for total starts between 2021 (blue) and 2022 (red).

Total starts were down 0.1% in August compared to August 2021.  Total starts, year-to-date, are up 2.7% compared to the same period in 2021.

Record Number of Housing Units Under Construction

The fourth graph shows housing starts under construction, Seasonally Adjusted (SA).

Red is single family units. Currently there are 812 thousand single family units under construction (SA). This is below the previous four months, and 16 thousand below the peak in April and May. Single family units under construction have peaked since single family starts are now declining. The reason there are so many homes under construction is probably due to supply constraints.

Blue is for 2+ units. Currently there are 890 thousand multi-family units under construction.  This is the highest level since February 1974! For multi-family, construction delays are probably also a factor. The completion of these units should help with rent pressure.

Combined, there are 1.702 million units under construction. This is the all-time record number of units under construction.

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 still starting more multifamily units than they are completing.  Multifamily completions (red) should pick up soon.

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.

The recent gap between starts and completions is decreasing since builders are now starting fewer single-family units - and completions (red) are increasing.

Conclusion

Total housing starts in August were above consensus expectations, however, starts in June and July, were revised down, combined. The month-to-month increase in August starts was mostly due to multi-family starts. The recent weakness has been for single family starts.

A record number of housing units are under construction due to construction delays, but the number of single-family housing units under construction is now declining.

Homebuilders are reporting that demand is slowing, yet a large number of housing units will be delivered later this year and in early 2023 (with all these units under construction). Yesterday, the National Association of Home Builders (NAHB) reported that builder confidence declined in September, and we should expect starts to decline in coming months.