by Calculated Risk on 6/16/2021 10:22:00 AM

Earlier: Housing Starts increased to 1.572 Million Annual Rate in May

Total housing starts in May were below expectations, and starts in March and April were revised down slightly. Supply constraints probably held back housing starts again in May.   

Single family starts increased in May, and were up 51% year-over-year (starts declined at the beginning of the pandemic). 

The volatile multi-family sector is up sharply year-over-year (apartments were under pressure from COVID).

The housing starts report showed total starts were up 3.6% in May compared to the previous month, and total starts were up 50.3% year-over-year compared to May 2020.

Low mortgage rates and limited existing home inventory have given a boost to single family housing starts.

The first graph shows the month to month comparison for total starts between 2020 (blue) and 2021 (red). 

Click on graph for larger image.

Starts were up 50.3% in May compared to May 2020.  The year-over-year comparison will be easy again in June, but will be more difficult starting in July.

2020 was off to a strong start before the pandemic, and with low interest rates, and little competing existing home inventory, starts finished 2020 strong.  

Starts have started 2021 strong (February was impacted by the harsh weather).

Below is an update to the graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market, and starts are important because that is future new supply (units under construction is also important for employment).

These graphs use a 12 month rolling total for NSA starts and completions.

The blue line is for multifamily starts and the red line is for multifamily completions.

The rolling 12 month total for starts (blue line) increased steadily for several years following the great recession - then mostly moved sideways.  Completions (red line) had lagged behind - then completions caught up with starts- then starts picked up a little again late last year, but have fallen off with the pandemic.

The last graph shows single family starts and completions. It usually only takes about 6 months between starting a single family home and completion - so the lines are much closer. The blue line is for single family starts and the red line is for single family completions.

Single family starts are getting back to more normal levels, but I still expect some further increases in single family starts and completions on a rolling 12 month basis - especially given the low level of existing home inventory.