Apartment Starts Up, Permits Down

As part of a housing report that also saw new single-family construction reach a 10-year high in November, the Census Bureau on Tuesday reported an 11.1% seasonally adjusted increase year-over-year in multifamily starts for the month.

However, in keeping with a trend reported recently by RealPage, permits for residences of five or more units were down 8.8% from October and 7.7% from November 2016 to a seasonally adjusted annual rate of 395,000 units. In contrast, permits on single-family homes hit the highest level in more than a decade.

Conversely, permits for single-family residences were up 9.7% Y-O-Y and permits overall were up 3.4%. “The year-over-year increase in housing starts is good news for the housing market, as starts are the source of future completions, meaning an increasing amount of new housing supply is on the way,” says Mark Fleming, chief economist at First American Finance Corp. “Housing completions have just begun to keep up with new household formation this past quarter.

“While new household formation has remained relatively steady, the past two quarters have seen an increase, specifically a shift from renter-occupied to owner-occupied households, as millennials age into home ownership,” he adds.

Completions, though, were down 7.2% from a year ago—and for multifamily, down even more sharply with a 17.1% Y-O-Y-drop.

Fleming says that in spite of this decrease, “the increase in housing starts will be good news for future completions, signaling some relief for the supply shortage in 2018.” First American data show that the residential market has been under-performing its sales potential since at least May, due mainly to a shortage of supply.

Looking at starts generally, the Census Bureau reported a seasonally adjusted annual rate of 1,297,000, a 12.9% increase from a year ago. For single-family starts, November represented an annual pace of 930,000 units, up 13% from the year prior and the highest number since September 2007. The November rate for units in buildings with five units or more was 359,000.

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