Housing Starts

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s second update discusses housing starts.

• In a strong showing, total housing starts crested the 1,000,000 mark in April, the first time since June of 2008.  However, the bulk of the improvement was on the multi-family side, with a modest decline on the single-family side.
• Housing starts have a strong impact on job creation and sales and thus jobs in related industries.  Furthermore, they directly impact housing supply.
• Single family construction eased 4.8% from February to March, but is still up 28.7% relative to last year.
• Likewise, permits for construction of single family units eased 0.5% over the same time frame to 595,000, but are up 27.7% compared to last year.
• While housing starts are strong relative to recent history, they remain well below the historic average.  Inventories for both new homes and existing homes are tight in tandem with falling delinquencies and foreclosure starts.  These trends are combining to help fuel strong price appreciation and to curb consumers’ options.  An expansion of construction would help to ease price spikes in some local markets.
• While multifamily construction is on the rise, research by the Federal Reserve has shown that most post-foreclosure renters who were in single-family homes prefer to remain in them.  Consequently, the increase in multi-family construction is not anticipated to destabilize supplies in markets that have experienced strong investor demand for single family homes in recent years.