Residential Construction Lags Expectations, Except in the West

Contrary to expectations, all three of the residential construction measures from the U.S. Census Bureau and the Department of Housing and Urban Development fell in March.  Not only were they lower than in February, but they were down year-over-year, and both permits and housing starts are running behind 2018 on a year-to-date (YTD) basis.  The West was the only region to show any strength.

Permits for residential units were at a seasonally adjusted annual rate of 1,269,000 units, a 1.7 percent decrease from the February estimate of 1,291,000.  That estimate was also revised lower from an original estimate of 1,296,000.   The March number was 7.8 percent lower than the rate a year earlier, 1,377,000 units.

Analysts had expected permitting to range be at an annual rate of 1,300,000 units.  Estimates among those polled by Econoday ranged from 1,287,000 to 1,320,000 units.

Permits for single-family construction were also down, an estimated 808,000 permits were issued on an annualized basis.  This is 1.1 percent below the February rate of 817,000 (revised from 821,000) and down 5.1 percent compared to the prior March.  Permits for construction in buildings with five or more units dropped 2.7 percent and 12.6 percent from the two earlier periods to a rate of 425,000 units.

On an unadjusted basis, permits were issued for 103,900 units in March compared to 89,700 in February.  Single-family permits accounted for 68,200 of the total compared to 57,400 the previous month.

Permits thus far in 2019 are down 5.4 percent from the first three months of 2018 at an aggregate of 288,900 authorizations.  Single-family permitting is 7.8 percent slower than YTD 2018, and multifamily permitting is down 12.6 percent.

Residential construction was started at a seasonally adjusted rate of 1,139,000 units, down 0.3 percent from the 1,142,000 units estimated for February.  The February number was a revision from the first estimate of 1,162,000 units. Starts are lagging their March 2018 pace by 14.2 percent.

Analysts also overshot the mark for housing starts. They had expected an annual rate of 1,230,000 with a range of 1,168,000 to 1,300,000 annual units.  

Single-family starts were down 0.4 percent from February and 11.0 percent compared to March 2018 to an annual rate of 785,000 units.  The February estimate, originally 805,000 units, was revised down to 788,000.  Multifamily starts, at 337,000, are down 3.4 percent and 21.8 percent from the two earlier periods.

On a non-adjusted basis, construction was begun on 93,300 residential units in March, 65,500 of them single-family units.  The February numbers were 80,200 and 54,900 respectively.

YTD there have been 260,600 residential units started compared to 288,500, a decline of 9.7 percent. Single-family starts are down 5.3 percent and multifamily 9.8 percent.

Completions, which had a strong February due to multifamily activity, also declined, down 1.9 percent for the month to 1,313,000 units.  This was still 6.8 percent higher than in March 2018.  Single family completions jumped by 11.9 percent and were 8.8 percent higher year-over-year while multifamily completions gave back most of their February gain, falling 25.1 percent while remaining up 2.2 percent year-over-year.

On a non-adjusted basis there were 103,100 units completed during the month compared to 92,400 in February.  The single-family numbers were 74,200 and 57,700 respectively.  Year to date there have been 282,600 residential units completed, 5.6 percent more than during the same period in 2018.  Single family completions are up 4.3 percent and multifamily by 9.1 percent.

At the end of the reporting period there were 1,126,000 units under construction, 531,000 of them single-family units.  These are respective declines of 1.6 percent and 1.7 percent from February.  In addition, there are 197,000 permits which have been issued but under which construction has not begun.  Ninety-seven thousand are for single-family units,

Permitting in the Northeast was 9.6 percent lower than in both February and in March 2018 Housing starts also fell, by 4.4 percent from February and 28.3 percent year-over-year.  Completions grew 24.3 percent from the previous month but are 8.0 percent lower than the prior March.

Permits in the Midwest declined by 3.6 percent from February and were down 8.9 percent year-over-year. Starts declined 17.6 percent and 28.0 percent from the two prior periods.  Completions slowed by 3.2 percent for the month but are up 19.5 percent for the year.

The South had a decline of 4.6 percent in permitting compared to the prior month and there were 1.2 percent fewer issued than in March 2018. Starts were down 7.2 percent and 4.1 percent compared to February and the prior March respectively.  There were 0.3 percent more homes completed than in February and 14.6 percent more than the previous March.

Permitting increased in the West by 10.0 percent but still lagged the same month in 2018 by 17.8 percent. Starts surged 31.4 percent month-over-month while running 19.5 percent behind the previous March.  Completions were down for both periods by 13.4 percent and 6.4 percent respectively.