November Housing Starts: Record Number of Housing Units Under Construction

Housing Starts Decreased to 1.427 million Annual Rate in November

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately‐owned housing starts in November were at a seasonally adjusted annual rate of 1,427,000. This is 0.5 percent below the revised October estimate of 1,434,000 and is 16.4 percent below the November 2021 rate of 1,706,000. Single‐family housing starts in November were at a rate of 828,000; this is 4.1 percent below the revised October figure of 863,000. The November rate for units in buildings with five units or more was 584,000.

Building Permits:
Privately‐owned housing units authorized by building permits in November were at a seasonally adjusted annual rate of 1,342,000. This is 11.2 percent below the revised October rate of 1,512,000 and is 22.4 percent below the November 2021 rate of 1,729,000. Single‐family authorizations in November were at a rate of 781,000; this is 7.1 percent below the revised October figure of 841,000. Authorizations of units in buildings with five units or more were at a rate of 509,000 in November.
emphasis added

Possibly Important: Note the sharp decline in multi-family permits in November. This has been averaging close to 650,000 SAAR over the last 8 months and declined to 509,000 in November from 620,000 in October. This is a possible signal that the expected decline in multi-family starts will happen soon (although permits aren’t a perfect leading indicator for starts).

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

Multi-family starts (blue, 2+ units) increased in November compared to October. Multi-family starts were up 23.3% year-over-year in November. Single-family starts (red) decreased in November and were down 32.1% year-over-year.

Note that the recent weakness - so far - has been in single family starts (red).

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

Total housing starts in November were above expectations, however, starts in September and October 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 16.4% in November compared to November 2021.  Total starts, year-to-date, are down 1.2% compared to the same period in 2021. Starts have been down year-over-year for seven consecutive months, and the comparison will be very difficult in December (starts were strong at the end of 2021). Housing starts will end the year down about 3% compared to 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 777 thousand single family units (red) under construction (SA). This is below the previous seven months, and 51 thousand below the recent 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 932 thousand multi-family units under construction.  This is the highest level since December 1973! For multi-family, construction delays are probably also a factor. The completion of these units should help with rent pressure.

Combined, there are 1.709 million units under construction. This ties last month as 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 starts (blue) should decline soon, and 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 has disappeared since builders are now starting fewer single-family units - and completions (red) are increasing.

Conclusions

Total housing starts in November were above expectations, however, starts in September and October were revised down slightly, combined. The recent weakness has been for single family starts.

Multi-family starts will likely slow soon due to a combination of less rent growth and higher interest rates. We are already seeing a slowdown in design for multi-family.

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

Homebuilders are reporting that demand has slowed, yet a large number of housing units will be delivered over the next year (with all these units under construction). Yesterday, the National Association of Home Builders (NAHB) reported that builder confidence declined further in December and is at a very low level.