September Housing Starts: Record Number of Housing Units Under Construction

Housing Starts Decreased to 1.439 million Annual Rate in September

From the Census Bureau: Permits, Starts and Completions

Housing Starts:

Privately‐owned housing starts in September were at a seasonally adjusted annual rate of 1,439,000. This is 8.1 percent below the revised August estimate of 1,566,000 and is 7.7 percent below the September 2021 rate of 1,559,000. Single‐family housing starts in September were at a rate of 892,000; this is 4.7 percent below the revised August figure of 936,000. The September rate for units in buildings with five units or more was 530,000.

Building Permits:

Privately‐owned housing units authorized by building permits in September were at a seasonally adjusted annual rate of 1,564,000. This is 1.4 percent above the revised August rate of 1,542,000, but is 3.2 percent below the September 2021 rate of 1,615,000. Single‐family authorizations in September were at a rate of 872,000; this is 3.1 percent below the revised August figure of 900,000. Authorizations of units in buildings with five units or more were at a rate of 644,000 in September.
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 September compared to August.   Multi-family starts were up 18.5% year-over-year in September.  Single-family starts (red) decreased in September and were down 14.6% year-over-year.

Note that the recent weakness has been 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 September were below expectations, and starts in July and August 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 7.7% in September compared to September 2021.  Total starts, year-to-date, are up 1.3% compared to the same period in 2021. However, the comparisons will be very difficult in Q4 (starts were strong in Q4 2021), and housing starts will end the year down 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 800 thousand single family units (red) under construction (SA). This is below the previous six months, and 28 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 910 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 1.710 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 September were below consensus expectations, and starts in July and August, were revised down, combined. The recent weakness has been for single family starts.

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 is slowing, 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 sharply in October, and we should expect starts to decline further in coming months.