July Housing Starts: Units Under Construction Declined Slightly

Housing Starts Decreased to 1.446 million Annual Rate in July

From the Census Bureau: Permits, Starts and Completions

Housing Starts:

Privately‐owned housing starts in July were at a seasonally adjusted annual rate of 1,446,000. This is 9.6 percent below the revised June estimate of 1,599,000 and is 8.1 percent below the July 2021 rate of 1,573,000. Single‐family housing starts in July were at a rate of 916,000; this is 10.1 percent below the revised June figure of 1,019,000. The July rate for units in buildings with five units or more was 514,000.

Building Permits:

Privately‐owned housing units authorized by building permits in July were at a seasonally adjusted annual rate of 1,674,000. This is 1.3 percent below the revised June rate of 1,696,000, but is 1.1 percent above the July 2021 rate of 1,655,000. Single‐family authorizations in July were at a rate of 928,000; this is 4.3 percent below the revised June figure of 970,000. Authorizations of units in buildings with five units or more were at a rate of 693,000 in July.
emphasis added

The first graph shows single and multi-family housing starts since 2000 (including housing bubble).

Multi-family starts (blue, 2+ units) decreased in July compared to June.   Multi-family starts were up 18.0% year-over-year in July.  Single-family starts (red) decreased in July and were down 18.5% 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 July were below expectations, however, starts in May and June were revised up slightly, combined.

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

Total starts were down 8.1% in July compared to July 2021.  Total starts, year-to-date, are up 3.8% compared to the same period in 2021.

Number of Housing Units Under Construction Declined Slightly

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

Red is single family units. Currently there are 816 thousand single family units under construction (SA). This is just below the previous three months, and 12 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 862 thousand multi-family units under construction.  This is the highest level since March 1974! For multi-family, construction delays are probably also a factor. The completion of these units should help with rent pressure.

Combined, there are 1.678 million units under construction. This is just below the all-time record set last month of 1.680 million units that were 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 July were well below consensus expectations, however, starts in May and June, were revised up slightly, combined. The recent weakness has been for single family starts.

A near record number of housing units are still 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 (with all these units under construction). Yesterday, the National Association of Home Builders (NAHB) reported that builder confidence turned slightly negative in July, and we should expect starts to decline further in coming months.