January Housing Starts and Permits

Total housing starts in January were down 16 percent from December and 20.1 percent from November with very little difference between single and multi-family construction. That is the news headline but on a closer analysis the situation is not so dire. On a three month moving average basis the recent results form only a slight blip on the long term growth curve (Figure 1).

The great unknown at this time is, “Where is multi-family headed?” The growth trajectory of single family units is well established and, barring unforeseen economic changes, full recovery will occur sometime around 2018. The prognosis for multi-family is much less clear because that sector has already fully recovered. Future growth of multifamily will be driven by the consumer’s attitude to the desirability of home ownership. Clearly the housing bubble and bust has changed those attitudes possibly on a generational basis. Apartment rental now seems preferable to home ownership in the minds of a significant proportion of the public. This is continuing to drive down the ratio of single to multi-family units which now stands at the lowest level in 30 years (Figure 2). The small down tick in Figure 1 was caused entirely by a decline in starts in the Mid West. The South and West are growing strongly while the North East is trending flat.