Starts Drop, Driven by Decline in Multifamily

This story was originally published in Builder.

Housing starts in February fell 7 percent from January and 4 percent from the same month last year to a seasonally adjusted annual rate of 1,236,000, the Census Bureau and Dept. of Housing and Urban Development reported Friday. The drop was driven by sharp declines in multifamily starts.

Single-family housing starts in February were at a rate of 902,000, 2.9 percent above the revised January figure of 877,000 and also 2.9 percent ahead of February 2017. The February rate for units in buildings with five units or more was 317,000, down 28 percent sequentially and 19.1 percent year-over-year.

Building permits fell 5.7 percent from January to a seasonally adjusted annual rate of 1,298,000, still 6.5 percent above the February 2017 rate of 1,219,000. Single-family authorizations fell 0.6 percent to a rate of 872,000 but remained 4.6 percent ahead of the same month last year. Authorizations of units in buildings with five units or more were at a rate of 385,000 in February, down 14.8 percent from January but up 13.2 percent from a year earlier.

Housing completions in February were at a seasonally adjusted annual rate of 1,319,000, 7.8 percent above the revised January estimate of 1,224,000 and 13.6 percent above the February 2017 rate of 1,161,000. Single-family housing completions in February were at a rate of 895,000, up 3.0 percent from the revised January rate of 869,000. The February rate for units in buildings with five units or more was 418,000, up 21.5 percent sequentially and up 9.4 percent year-over-year.

“Housing starts are the source of future completions, and while builders broke ground on fewer homes overall this month compared with February 2017, it was mostly due to a drop in multifamily housing starts," said Mark Fleming, chief economist at First American. "Single-family housing starts increased 2.9 percent compared with last February. Housing completions, the number of net new homes added to the housing stock, increased dramatically compared with a year ago. This signals some relief for the supply shortage. The rise in permits, the leading indicator of housing starts, in conjunction with the dramatic rise in construction employment this month, signals an upward trajectory for housing starts for the spring home buying season. Residential construction employment is easing as a headwind to future housing starts.”