New residential construction spending surged 3.0% on a seasonally adjusted (SA) basis in June after rising an almost as strong 2.7% in May. Single-family construction spending jumped 3.0% following a 2.2% increase in May. Multifamily construction spending advanced 2.8% in June after rocketing 5.1% higher the previous month. On a year-to-date basis, single-family and multifamily construction spending were up 12.4% and 14.8%, respectively, from last year.
Residential Construction Spending Data | ||||||||
| Monthly Figures (1) (latest actual values) |
3-Month Moving Average | Year-to-Date (NSA) | ||||||
| Apr-12 | May-12 | Jun-12 | Apr-12 | May-12 | Jun-12 | Jan-10 to Jun-11 |
Jan-11 to Jun-12 |
|
| New Single-family | 119.6 | 122.2 | 125.9 | 118.4 | 119.8 | 122.5 | 49.7 | 55.8 |
| Month-over-Month % Change | 1.6% | 2.2% | 3.0% | 1.1% | 1.2% | 2.3% | ||
| (Year-over-year % change of NSA data) | 11.7% | 14.9% | 18.3% | -9.0% | 12.4% | |||
| New Multifamily (2) | 25.5 | 26.8 | 27.5 | 24.5 | 25.4 | 26.6 | 10.8 | 12.4 |
| 5.9% | 5.1% | 2.8% | 2.3% | 3.7% | 4.5% | |||
| 15.1% | 23.3% | 20.2% | -8.0% | 14.8% | ||||
| New Residential (3) | 145.0 | 148.9 | 153.4 | 142.9 | 145.2 | 149.1 | 60.5 | 68.2 |
| 2.3% | 2.7% | 3.0% | ||||||
| 12.3% | 16.3% | 18.6% | -8.8% | 12.8% | ||||
| Residential Improvements (4) | 115.6 | 119.6 | 118.7 | 115.9 | 116.5 | 118.0 | 54.0 | 54.1 |
| 1.1% | 3.5% | -0.8% | -0.6% | 0.5% | 1.2% | |||
| -0.8% | -6.0% | 1.2% | 2.1% | 0.2% | ||||
| Total Residential (5) | 260.6 | 268.5 | 272.1 | 258.8 | 261.8 | 267.1 | 114.5 | 122.3 |
| 1.7% | 3.0% | 1.3% | 0.5% | 1.1% | 2.0% | |||
| 5.9% | 4.9% | 10.1% | -4.0% | 6.9% | ||||
(1) Monthly levels are seasonally adjusted at annual rates (SAAR figures). | ||||||||
Single-Family Housing
The Census Bureau reported that July total housing starts fell 1.1% (SA) after increasing 6.8% in June. The decline was due to single-family housing starts falling 6.5% to 502,000 at a seasonally adjusted annual rate (SAAR) from June’s 537,000. Despite the July reversal, the first decline in five months, single-family starts have been at or above 460,000 for the past nine months and above 500,000 for six of the last eight months.
Positive news comes from July’s single-family building permits, which jumped 4.5% to 513,000, their highest level since March 2010. Another positive indicator for the single-family housing market comes from the August NAHB/Wells Fargo Housing Market Index (HMI), which rose a healthy 2 points to 37, after spurting up 6 points in July. The August HMI is its highest reading since February 2007. Increases in the HMI typically precede increases in housing starts by one to two months.
Multifamily Housing
July multifamily starts surged 12.4% for the second month in a row to 244,000 (SAAR), which partially offset the decline in single-family starts. More instructive given multifamily starts’ volatility, July’s three-month moving average of 218,000 was essentially unchanged from June. The moving average has now been above 200,000 starts for nine straight months. Meanwhile, July’s three-month moving average of multifamily building permits at 287,000 was its highest reading since September 2008.
Residential Construction Data | ||||||||||
| Monthly Figures (1) (latest actual values) |
3-Month Moving Average | Year-to-Date (NSA) | Year-to-Date (NSA) | |||||||
| May-12 | Jun-12 | Jul-12 | May-12 | Jun-12 | Jul-12 | Jan-10 to Jun-11 |
Jan-11 to Jun-12 |
Jan-10 to Jul-11 |
Jan-11 to Jul-12 |
|
| Northeast Starts | 76 | 78 | 77 | 81 | 78 | 77 | 32 | 38 | 40 | 45 |
| Month-over-Month % Change | -5.0% | 2.6% | -1.3% | 4.3% | -3.7% | -1.3% | ||||
| Year-over-year % Change of NSA data | 32.1% | 13.0% | -8.7% | -7.3% | 19.3% | -4.1% | 13.6% | |||
| Midwest Starts | 108 | 100 | 117 | 116 | 111 | 108 | 47 | 52 | 56 | 64 |
| -13.6% | -7.4% | 17.0% | 2.6% | -4.6% | -2.4% | |||||
| 5.6% | -18.9% | 35.2% | -1.5% | 11.1% | -1.6% | 15.0% | ||||
| South Starts | 365 | 368 | 355 | 371 | 376 | 363 | 150 | 194 | 178 | 227 |
| -7.6% | 0.8% | -3.5% | -4.6% | 1.3% | -3.5% | |||||
| 36.3% | 31.6% | 18.4% | -7.7% | 29.4% | -5.1% | 27.7% | ||||
| West Starts | 157 | 208 | 197 | 151 | 171 | 187 | 61 | 80 | 73 | 99 |
| 6.8% | 32.5% | -5.3% | 5.3% | 13.0% | 9.8% | |||||
| 18.3% | 54.6% | 52.0% | -1.8% | 32.3% | 1.9% | 35.7% | ||||
| Total Starts (2) | 706 | 754 | 746 | 720 | 736 | 735 | 289 | 364 | 347 | 436 |
| -5.5% | 6.8% | -1.1% | -0.6% | 2.2% | 0.0% | |||||
| 25.6% | 23.5% | 24.5% | -5.6% | 26.0% | -3.1% | 25.8% | ||||
| Single-family Starts | 513 | 537 | 502 | 499 | 518 | 517 | 213 | 257 | 254 | 307 |
| 1.8% | 4.7% | -6.5% | 3.0% | 3.7% | -0.1% | |||||
| 22.5% | 23.0% | 20.7% | -17.0% | 20.9% | -14.6% | 20.8% | ||||
| Multifamily | 193 | 217 | 244 | 220 | 218 | 218 | 76 | 107 | 93 | 129 |
| -20.6% | 12.4% | 12.4% | -7.7% | -1.2% | 0.2% | |||||
| 35.1% | 24.8% | 33.7% | 52.8% | 40.5% | 53.0% | 39.3% | ||||
| New Home Sales (3) | 382 | 350 | NA | 364 | 363 | NA | 157 | 190 | NA | NA |
| 6.7% | -8.4% | 1.5% | -0.2% | |||||||
| 28.6% | 17.9% | -13.7% | 21.0% | |||||||
| Manufactured Home Shipments | 56 | 51 | NA | 56 | 54 | NA | 23152 | 27715 | NA | NA |
| 3.1% | -8.9% | -4.0% | -3.7% | |||||||
| 16.7% | 1.1% | -12.3% | 19.7% | |||||||
Housing starts, home sales, and manufactured home shipments are all in thousands. | ||||||||||
Outlook for Residential Construction
The housing market appears to be on solid footing, with a clear, if languid, upward trend despite some normal monthly fluctuations. The foreclosure problem is slowly abating. More lenders now recognize the benefit of negotiating with a borrower either prior to default or in default, working out a reduction in principal or agreeing to a short sale rather than pursuing a foreclosure.
Modestly rising prices for single-family homes in a number of metro markets is giving both prospective home buyers and lenders more confidence. Overly conservative appraisals remain a significant hurdle to housing’s recovery, but even here there has been some movement in the right direction.
Overall the outlook for multifamily construction spending remains positive. Continued low interest rates, falling vacancy rates (second quarter SA rental vacancy rate fell to 8.6% from first quarter’s 8.9% and is the lowest vacancy rate since second quarter 2002), and rising rents underlie our forecast for multifamily construction. The forecast for single-family construction is for continued recovery from its current anemic level. The growing economy, continued hiring, low mortgage rates, and slightly easier mortgage lending standards are all positives for housing and residential construction.
At this point, employment growth is the most important factor that will drive the housing market. If the recent rebound in hiring persists, the housing recovery will continue and pick up speed. Our forecast is based on the assumption that economic growth and employment will improve over the next several months.
The forecast is for new residential construction spending to increase 15.7% in 2012 and 15.8% in 2013. Note that these increases are from a low base. Based on demographics, multifamily housing starts are roughly a third below the economy’s long-term needs and single-family starts are less than half its desired level. Clearly, although improving, the nation is still far from a return to a fully normal housing market.
Residential Construction Data |
||||||
| Actual | Forecast | |||||
| 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | |
| Northeast Starts | 121 | 62 | 72 | 68 | 79 | 91 |
| (Year-over-year % change of NSA data) | -15.3% | -48.9% | 15.9% | -5.4% | 16.6% | 14.7% |
| Midwest Starts | 135 | 97 | 98 | 101 | 115 | 131 |
| -35.8% | -28.0% | 0.8% | 3.1% | 13.7% | 14.2% | |
| South Starts | 453 | 278 | 298 | 308 | 383 | 415 |
| -33.4% | -38.6% | 6.9% | 3.5% | 24.5% | 8.2% | |
| West Starts | 196 | 117 | 120 | 133 | 176 | 237 |
| -38.9% | -40.5% | 2.7% | 10.5% | 33.0% | 34.4% | |
| Total Starts (1) | 906 | 554 | 587 | 609 | 753 | 873 |
| -33.2% | -38.8% | 5.9% | 3.7% | 23.7% | 15.9% | |
| Single-family Starts | 622 | 445 | 471 | 431 | 523 | 604 |
| -8.3% | -61.6% | 6.2% | 54.0% | 29.1% | 17.1% | |
| Multifamily Starts | 284 | 109 | 116 | 178 | 230 | 269 |
| -40.5% | -28.4% | 5.9% | -8.6% | 21.5% | 15.4% | |
| New Home Sales (2) | 485 | 375 | 323 | 306 | 366 | 420 |
| -37.5% | -22.7% | -13.9% | -5.3% | 19.7% | 14.6% | |
| Manufactured Home Shipments | 82 | 50 | 50 | 52 | 59 | 69 |
| -14.4% | -39.2% | 0.5% | 3.1% | 14.6% | 16.2% | |
| Residential Construction Spending (Billions Current $) | ||||||
| New Single-family | 185.8 | 105.3 | 112.6 | 108.2 | 124.0 | 141.9 |
| -39.1% | -43.3% | 6.9% | -3.9% | 14.6% | 14.4% | |
| New Multifamily (3) | 51.2 | 35.9 | 24.1 | 22.6 | 27.3 | 33.3 |
| -8.1% | -30.0% | -32.9% | -6.0% | 20.7% | 21.9% | |
| New Residential (4) | 237.0 | 141.2 | 136.7 | 130.8 | 151.3 | 175.1 |
| -34.3% | -40.4% | -3.2% | -4.3% | 15.7% | 15.8% | |
| Residential Improvements (5) | 120.7 | 112.7 | 112.5 | 114.9 | 118.7 | 123.9 |
| -13.5% | -6.6% | -0.2% | 2.2% | 3.3% | 4.4% | |
| Total Residential (6) | 357.7 | 253.9 | 249.1 | 245.7 | 270.0 | 299.1 |
| -28.5% | -29.0% | -1.9% | -1.4% | 9.9% | 10.8% | |
Housing starts, home sales, and manufactured home shipments are all in thousands. |
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