Housing starts were down in March on both a month-to-month and year-over-year basis, reaching a low not seen since May 2017, according to Commerce Department figures released earlier this month. For multifamily construction starts, the Y-O-Y dropoff was nearly twice as steep as that for single-family homes.
Homebuilders launched single-family builds at a seasonally-adjusted annual rate (SAAR) of 785,000 units in March, off 11% from March 2018. In the apartment sector, March’s SAAR of new starts was 337,000 units, a 21.8% decline from the year-ago period. The steepest declines by region were seen in the West, where combined single-family and multifamily starts were down 27.1% Y-O-Y.
Single-family homes under construction as March ended were up 4.5% from a year ago, while multifamily was off 3.8% compared to March 2018. On a month-to-month basis, single-family permits fell 1.1% from February to an annualized pace of 808,000, while multifamily permits dropped 2.7% to a SAAR of 461,000.
Conversely, multifamily and single-family completions both were up on a Y-O-Y basis, although less so for multifamily (up 2.2%) than for single-family (8.8%).
Industry observers have anticipated a gradual slowdown in multifamily construction levels for the past several months. “After reaching a peak in 2019, new supply is predicted to level off as an increase in vacancy rates, coupled with construction lending regulations, are causing some developers and lenders to exhibit caution moving forward,” Valbridge Property Advisors reported last August.
The broader picture painted by the Commerce Department’s data is simultaneously inconclusive and sobering. “The government’s data on new home construction are notoriously unreliable, making it hard to rely on any one report for a big-picture view,” MarketWatch reported when the March housing numbers came out. “Still, for the year to date, starts are down 9.7% compared to the same period last year.”
Longer term, MarketWatch reported, “New construction has been anything but a shot in the arm for a supply-starved housing market. Homebuilders are wary of overbuilding, like in the last cycle, and also constrained by more difficult conditions.
“Labor is hard to find, and policies, like trade war tariffs, are making materials more costly,” according to MarketWatch. “It’s always been more challenging to build homes for the lower end of the market, and even more so now.”
At the National Association of Home Builders, Chief Economist Robert Dietz also cited labor shortages, along with “excessive regulations” and “a lack of buildable lots.” However, he added, “Recent declines in mortgage rates should help support the market in future months.”
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