Multifamily Sector Drags Down Housing Starts
May 17, 2018
A sluggish reading on housing production last month was mostly due to a decline in the construction of apartment buildings and condos. Housing production, reflecting multifamily and single-family homes, dropped 3.7 percent in April to a seasonally adjusted annual rate of 1.29 million units, the Commerce Department reported Wednesday. The decrease follows an 11-year high in housing production that was set in March.
“We expected some pullback this month after such a strong March report, but housing starts remain at very healthy levels in April,” says Randy Noel, chairman of the National Association of Home Builders. “With homeownership rates on the rise, demand for single-family homes should continue to spur production in the months ahead.”
Single-family housing starts were mostly flat last month, inching up just 0.1 percent in April to 894,000 units. Meanwhile, multifamily starts plunged 11.3 percent in April to a seasonally adjusted annual rate of 393,000 units.
Builders are remaining optimistic.
“Single-family starts are up 8.3 percent for the first four months of the year relative to the start of 2017, which is higher than our forecast and bodes well for the rest of the year,” says NAHB Chief Economist Robert Dietz. “However, builders must manage supply-side hurdles, such as ongoing building material price increases and shortages of land and labor, to meet growing housing demand. Lumber prices continue to rise, with recent increases adding more than $7,000 to the price of an average single-family home.”
Regionally, combined single- and multifamily housing production in April rose by 6.4 percent in the South. On the other hand, starts dropped 16.3 percent in the Midwest, by 12 percent in the West, and by 8.1 percent in the Northeast.
Permits, a gauge of future housing production, dropped 1.8 percent in April to a seasonally adjusted annual rate of 1.35 million units. Single-family permits rose 0.9 percent to 859,000 units, while the multifamily sector continued to show decline. Multifamily permits dropped 6.3 percent to 493,000 units, following a 20.4 percent jump in March. Permits rose the most in the South, by 12 percent month over month, while dropping 31.9 percent in the Northeast, by 13.2 percent in the West, and 4.4 percent in the Midwest, the Commerce Department reports.
Updated: August 17, 2018