Starts, Permits Drop in November, Completions Jump
Weather, Multifamily Volatility Factors in Decreases
Overall housing starts tumbled in November, caused in large part by a sharp decline in the multifamily sector, according to data in the Census Bureau's latest residential construction report. Permits fell modestly, while completions soared.
After surging more than 15 percent in October, residential starts fell 18.7 percent in November to a seasonally adjusted annual rate of 1,090,000 units. Starts also dropped on a year-over-year basis by 6.9 percent.
"Single-family starts declined from a robust level in October but still remain very solid," said Robert Dietz, chief economist for the National Association of Home Builders. "Though rising mortgage rates could be a headwind for housing, we expect single-family production to continue on a long-run, gradual growth trend. Meanwhile, the multifamily sector, which has been volatile in recent months, is expected to level off at a solid rate as that market finds balance between supply and demand."
The November drop in starts was larger than consensus estimates, said Mark Vitner, senior economist with the Wells Fargo Economics Group. He noted, however, that starts in October were revised upward (to 1,340,000 units), and that permits held up reasonably well.
"Much of the volatility in starts has been in the multifamily sector, which saw starts surge 76 percent in October and fall back 45.1 percent in November," Vitner said. "The past three months have been unusually volatile for multifamily starts. Permits have not moved around nearly as much."
Single-family housing starts fell 4.1 percent, but have risen 5.3 percent from a year earlier, according to the Census Bureau data. Multifamily starts plummeted 43.9 percent month-over-month, and have dropped 31.7 percent compared to November 2015.
"This year's unseasonably mild fall weather, which led to a plunge in utility use, allowed work to begin on more single-family homes than usual in October, which caused the seasonally adjusted starts number to surge 10.5 percent that month," Vitner said. "On a non-seasonally adjusted basis, single-family starts rose just 7.9 percent."
"Year-to-date, single-family starts are up 9.6 percent and the overall trend in this sector remains positive," said Ed Brady, chairman of the NAHB. "Builder sentiment is strong and we can look forward to growth in the single-family market in the year ahead, as the industry adds workers and lots, and Washington policymakers provide regulatory relief for small businesses."
Permits decreased 4.7 percent to 1,201,000 units (SAAR), and have dropped 6.6 percent since November 2015. Single-family is up 0.5 percent month-over-month, and has increased 5.9 percent year-over-year. Multifamily has dropped 15.8 percent from October, and has also fallen 26.4 percent from a year ago.
Despite the decrease, the November permits total is "solid," Vitner said. "Overall, permits are running slightly below their trailing three-month average but are still 10.2 percent higher than starts. The entire gap is in multifamily units, where the three-month moving average of starts is running a staggering 72.4 percent below the three-month moving average of permits."
Completions rose 15.4 percent to 1,216,000 units (SAAR), and have increased 25.0 percent from a year ago. Single-family has climbed 3.3 percent, and also increased 20.6 percent year-over-year. Multifamily has gone up 44.5 percent, and jumped 36.3 percent from a year earlier.
New residential construction data for December 2016 will be released on Thursday, Jan. 19, 2017