Housing Permits, Starts Increase Led by Multi-family Surge

By Mark Lieberman

Managing Director and Senior Economist

 

Highlights

  • The pace of housing starts rose 9.8 percent in June to a seasonally adjusted annual rate (SAAR) of 1,174,000 units, topping one million for the third straight month
  • Single-family starts fell for the second straight month, albeit by 0.9 percent, to an SAAR of 685.000.
  • Multi-family starts rose 29.4 percent to an SAAR of 489,000 units, the highest level since April 1988
  • Total permits jumped 7.4 percent to 1,343,000 (SAAR), the highest level July 2007, five months before the Great Recession began.
  • Permits for single family construction edged up 0.9 percent to 687,000 (SAAR), the highest level of the year.
  • Permits for multi-family housing meanwhile increased 15.3 percent to 656,000 (SAAR), the highest level since January 1990.
  • Total housing completions fell 6.7 percent with both single- and multi-family completions slipping.

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The monthly Census-Housing and Urban Development report  on residential construction activity corroborated the significant increases in builder confidence reflected in the two most recent reports from the National Association of Home Builders. The NAHB’s Housing Market Index, the industry confidence measure, was reported at 60 (out of 100) for July  and June’s original reading of 59 was revised up to 60, levels unseen since December 2005.

That the activity appears to have been concentrated in multi-family permits and starts – housing more prevalent on the coasts – shouldn’t detract from the positive report. Some the activity may have been artificial – at least in the timing – as a tax incentive program in New York had been schedule to expire in mid-June and developers may have rushed applications to beat a deadline. The program received a six-month reprieve so we may see the same phenomenon at the end of the year.

All that said, the June activity, along with upward revisions for April and May housing starts, are key drivers for out-of-work construction trades. The number of construction jobs, even with recent increases, is down almost 15 percent – 1.1 million — from December 2007, when the recession began. About 620,000 of those jobs were residential construction. When the recession began, residential construction accounted for almost 41 percent of all construction jobs. Last month, according to the Bureau of Labor Statistics, residential construction’s share of all construction jobs had dipped to just over 38 percent.

The residential construction report gave mixed signals for the all-important single-family market. Single family homes represented only 51.2 percent of all permit filings, the lowest share since February 2013, continuing concerns that new households might be shying away from homeownership because of income constraints and high levels of student debt. With the Federal Open Market Committee poised to increase the target fed funds rate, homebuyers indeed may have a limited time to take advantage of current rates to buy a new home.

In the first five months of this year, single family permits represented an average of 58.7 percent of all permits down from 59.9 percent in the first five months of 2014. Unlike housing starts, permits are not affected by weather.  Single family starts accounted for 58.3 percent of all starts in June, below 60 percent for the first time since December 1985.

Hear Mark Lieberman every Friday on P.O.T.U.S. radio, Sirius-XM 124, at 6:20 am Eastern Time. You can follow Mark Lieberman on Twitter @foxeconomics.

 

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