A Positive Housing Report? November Residential Construction Changes Course

Residential construction performed an abrupt and unexpected about face in October. Permits, housing starts, and completions all improved on a month-over-month basis and, except for completions, they were not token increases.  The gains however did all come from the multifamily sector, single-family activity remained weak.

Permits for privately owned housing units were issued during the month at a seasonally adjusted annual rate of 1,328,000, a 5.0 percent jump from October.  This put the rate above water relative to a year earlier, up 0.4 percent.  The original 1,263,000 permits reported for October were revised up to 1,265,000.

Analysts polled by Econoday had not expected much from either permits or starts.  Their consensus estimate for the former was 1,257,000 units with a range of 1,250,000 to 1,275,000.

Permits for single-family houses eked out an 0.1 percent increase to a seasonally adjusted rate of 848,000 and remains down 1.9 percent on an annual basis. The October number was revised from 849,000 to 847,000.  Permits for units in buildings with five or more jumped by 15.4 percent to 441,000 units and is 5.5 percent ahead of November 2017.

On a non-adjusted basis there were 101,700 permits issued in November 60,900 of them for single-family construction.  In October the relative numbers were 112,600 and 73,900.

On a year-to-date (YTD) basis there have been 1,222,600 permits issued, a 4.2 percent increase from the first 11 months of 2017. Single-family permits are up 5.2 percent to 800,000 and multi-family permits increased by 2.1 percent.

Residential construction starts increased by 3.2 percent in November to a seasonally adjusted rate of 1,256,000 units, still down by 3.6 percent on a year-over-year basis. The annualized number of starts in October was revised downward to 1,217,000 from 1,228,000.  As with permits, the strength in housing starts was all about multifamily action.  Single family construction starts dropped by 4.6 percent to 824,000, putting it 13.1 percent behind the previous November.  The October estimate was revised down by 1,000 units.  Multifamily unit starts jumped 24.9 percent and are up 20.2 percent year-over-year.

Analysts had expected starts would slow from October; the consensus was for 1,221,000 units. Even the highest of the estimates which ranged from 1,200,000 to 1,252,000 undershot the results.  

There were an estimated 95,900 residential units started in November on an unadjusted basis compared to 106,100 in October. Single-family starts dropped from 74,900 to 60,300. During the first 11 months of this year there have been 1,179,000 starts compared to 1,121,600 during the same period last year, a 5.1 percent increase. Single family construction totals 824,900, up 3.9 percent from the same period in 2017, and multi-family starts rose 14.5 percent to 341,400 units.

Units were completed in November at a rate of 1,099,000 units, an 0.4 percent gain from 1,095,000.  The latter was a downward revision from 1,111,000 units. There were 3.9 percent fewer completions in November than a year earlier. 

There were 772,000 single family units completed on an annualized basis, a downturn of 5.4 percent and 1.2 percent fewer than a year earlier.  Multi-family completions rose 16.3 percent but were down 9.8 percent compared to November 2017.

On an unadjusted basis there were 91,800 units brought on line during the month, down from 98,400 the previous month. Single family completions numbered 66,900 compared to 74,800.

At the end of November there were an estimated 1,148,000 units under construction, 0.7 percent more than in October.  Of these, 531,000 were single family homes.  There were also 177,000 permits outstanding, 98,000 of them single family homes.

Permitting in the Northeast was unchanged from October and was 6.2 percent higher year-over-year. Starts surged by 37.8 percent and were up 33.3 percent on an annual basis. Completions were also way up, by 70.9 percent but still were running behind 2017 by 4.9 percent.

There was a 4.8 percent decline in the rate of permitting in the Midwest and it lagged by 5.3 percent year-over-year. Starts were also significantly lower, down, 19.2 percent from October and 12.4 percent from same period in 2017. Completions fell 20.1 percent from October and 19.7 percent from November 2017.

Permitting jumped by 10.5 percent in the South, bringing it 7.3 percent higher than the prior November and starts rose 15.1 percent and 1.3 percent for the two periods. Completions fell 3.5 percent from October and 12.6 percent from a year earlier.

There was an increase of 1.6 percent in permitting in the West compared to October but a decline of 11.0 percent from the same month last year. Starts fell off by 14.2 percent for the month and 18.4 percent on an annual basis. There was a 1.0 percent higher rate of completions from October, but 31.6 percent more units were finished than in November 2017.