February Housing Starts: Most Housing Units Under Construction Since 1973

Housing Starts Increased to 1.769 million Annual Rate in February

From the Census Bureau: Permits, Starts and Completions

Housing Starts:

Privately‐owned housing starts in February were at a seasonally adjusted annual rate of 1,769,000. This is 6.8 percent above the revised January estimate of 1,657,000 and is 22.3 percent above the February 2021 rate of 1,447,000. Single‐family housing starts in February were at a rate of 1,215,000; this is 5.7 percent above the revised January figure of 1,150,000. The February rate for units in buildings with five units or more was 501,000.

Building Permits:

Privately‐owned housing units authorized by building permits in February were at a seasonally adjusted annual rate of 1,859,000. This is 1.9 percent below the revised January rate of 1,895,000, but is 7.7 percent above the February 2021 rate of 1,726,000. Single‐family authorizations in February were at a rate of 1,207,000; this is 0.5 percent below the revised January figure of 1,213,000. Authorizations of units in buildings with five units or more were at a rate of 597,000 in February.
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 February compared to January. Multi-family starts were up 46.5% year-over-year in February. Note: Last year, starts were impacted by the freeze in Texas. Single-family starts (red) increased in February and were up 13.7% year-over-year.

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 (but still not historically high).

Total housing starts in February were above expectations, and starts in December and January were revised up.

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

Total starts were up 22.3% in February compared to February 2021.  Starts in February 2021 were negatively impacted by the freeze in Texas.

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

Red is single family units. Currently there are 799 thousand single family units under construction (SA). This is the highest level since December 2006.

For single family, many of these homes are already sold (Census counts sales when contract is signed). The reason there are so many homes is probably due to construction delays. Since many of these are already sold, it is unlikely this is “overbuilding”, or that this will impact prices (although the buyers will be moving out of their current home or apartment once these homes are completed).  

Blue is for 2+ units. Currently there are 784 thousand multi-family units under construction.  This is the highest level since June 1974! For multi-family, construction delays are probably also a factor. The completion of these units should help with rent pressure.

Combined, there are 1.583 million units under construction. This is the most since August 1973.

Length of Time from Authorization to Start and from Start to Completion

Census released the annual data on the length of time from start to completion, and this showed construction delays in 2021.

In 2021, it took an average of 7.2 months from start to completion for single family homes, up from 6.8 months in 2020. For multi-family, it took 15.4 months for buildings with 2 or more units in 2021, the same as in 2020 (the long delays will likely show up in the 2022 data since it takes over a year to complete).

From Authorization to Start, it took 1.3 months in 2021 for single family homes, up from 1.0 months in 2020, and it took 2.1 months in 2021 for multi-family, up from 2.0 months.

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. Starts have picked up, but completions (red) have turned down - due to the construction delays. 

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 due to the construction delays.

Conclusion

Housing starts in February were above consensus expectations and starts for the previous months were revised up. A strong report. There are a large number of housing units under construction due to construction delays.

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