May Housing Starts: All-Time Record Housing Units Under Construction
Housing Starts Decreased to 1.549 million Annual Rate in May
From the Census Bureau: Permits, Starts and Completions
Privately‐owned housing starts in May were at a seasonally adjusted annual rate of 1,549,000. This is 14.4 percent below the revised April estimate of 1,810,000 and is 3.5 percent below the May 2021 rate of 1,605,000. Single‐family housing starts in May were at a rate of 1,051,000; this is 9.2 percent below the revised April figure of 1,157,000. The May rate for units in buildings with five units or more was 469,000.
Privately‐owned housing units authorized by building permits in May were at a seasonally adjusted annual rate of 1,695,000. This is 7.0 percent below the revised April rate of 1,823,000, but is 0.2 percent above the May 2021 rate of 1,691,000. Single‐family authorizations in May were at a rate of 1,048,000; this is 5.5 percent below the revised April figure of 1,109,000. Authorizations of units in buildings with five units or more were at a rate of 592,000 in May.
The first graph shows single and multi-family housing starts since 2000 (including housing bubble).
Multi-family starts (blue, 2+ units) decreased in May compared to April. Multi-family starts were unchanged year-over-year in May. Single-family starts (red) decreased in May and were down 5.3% 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 May were well below expectations, however, starts in March and April, were revised up, combined.
The third graph shows the month-to-month comparison for total starts between 2021 (blue) and 2022 (red).
Total starts were down 3.5% in May compared to May 2021. Total starts, year-to-date, are up 8.2% compared to the same period in 2021.
Record Number of Housing Units Under Construction
Yesterday, Fed Chair Powell started to mention the record number of housing units under construction, see: Fed Chair Powell: "Homebuyers need a bit of a reset"
“How much will it affect housing prices? Not really sure. Obviously, we are watching that quite carefully. You’d think over time … There is a tremendous amount of supply in the housing market of unfinished homes … and as those come online …”
And then he quickly changed direction. Perhaps he was concerned about spooking homebuyers about the coming increase in new supply.
The fourth graph shows housing starts under construction, Seasonally Adjusted (SA).
Red is single family units. Currently there are 822 thousand single family units under construction (SA). This matches last month as the highest level since November 2006. The reason there are so many homes is probably due to construction delays.
Blue is for 2+ units. Currently there are 843 thousand multi-family units under construction. This is the highest level since April 1974! For multi-family, construction delays are probably also a factor. The completion of these units should help with rent pressure.
Combined, there are a record 1.665 million units under construction. This is above the previous record of 1.628 million units that were under construction in 1973 (mostly apartments in 1973 for the baby boom generation).
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.
Housing starts in May were well below consensus expectations, however, starts for the previous months were revised up.
There are a record number of housing units under construction due to construction delay (now above the previous record in 1973 when a huge number of apartments were being built for the baby boom generation).
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). And these homebuilder comments (and the confidence survey) were prior to the recent surge in mortgage rates.
CalculatedRisk Newsletter is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.