August housing starts reveal multifamily still healthy but single-family stagnating

Multifamily sags a bit but still achieving healthy levels; single-family starts stagnate due to large amounts of existing inventory at bargain prices.

September 20, 2013 |

Peter Muoio, Ph.D., senior principal and economist with Research, says the Census Bureau's August Housing Starts data released yesterday hints at improvements in the single-family sector with multifamily slowing down.

"The Census Bureau released August housing starts data today, reporting that total starts measured a seasonally adjusted annual rate of 891,000, just 0.9 percent above July’s downwardly revised estimate. Total housing starts had been growing, albeit slowly, during 2011 and 2012, but hit a snag earlier in 2013 as the national economic recovery slowed and interest rates rose.

  • A closer look shows multifamily starts decreased from the month prior, measuring at a seasonally adjusted annual rate of 263,000, an 11.1 percent drop from July’s figure of 296,000 but still 24 percent higher than a year ago.  Multifamily starts had been choppily rising since bottoming in 2009 until early 2013, reaching a recent high of 382,000 in March. However, since then, multifamily starts have been heading south but are still at healthy levels, which alleviates concerns of oversupply in the already-simmering multifamily market.

  • Unlike multifamily starts, which experienced a large increase over the past few years, single-family starts have more or less remained stagnant since the end of the recent recession. Single-family housing starts measured a seasonally adjusted annual rate of 628,000 in August, an uptick from July and 17 percent higher than a year ago. Still, single-family starts have remained between 400,000 and 600,000 since 2009, with very little fluctuation. The stagnation in single-family starts is easily explained by the still-high amount of existing-home inventory throughout the country. 

  • Existing homes are still available at nearly a 25 percent discount compared to new homes, a fact that is keeping both institutional investors and owner-occupiers away from the new-home market.

  • As mentioned previously, the slowed construction data puts any concerns of oversupply to rest. August’s figures also align with other recent-released housing data that indicate a slowdown in the housing recovery. We continue to iterate that in order for the housing market to recover in earnest, the broader economic recovery must pick up, eventually generating organic demand for housing."

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