Monday, June 6, 2011

April building permits for multi-family units up 17 percent, but single-family permits fall

Year-to-date in Colorado, building permits issued for multi-family construction are up 17 percent, year over year, while permits issued for single-family construction is down 18 percent for the same period.

This year, through April, there have been 882 multi-family permits issued in Colorado, and 2580 single-family permits issued. For the same period during 2010, there were 750 multi-family permits issued, and 3180 single-family permits.

For the month of April alone, single-family permits are up, year-over-year, by 9 percent, but multi-family permits are up 134 percent. There were 857 single-family permits and 202 multi-family permits issued during April 2011. There were 785 single-family permits issued during April 2010 and only 86 multi-family permits issued during the same period.

The second graph shows that overall, both multi-family and single-family permits in April are at levels below what was typical over the past decade. However, the April total for multi-family permits is fairly typical (albeit at the low end) for monthly totals since 2003.

New construction of single-family homes has shown few indications of renewed growth in recent months. Recent stats on April sales of newly-built homes from the Census Bureau showed only 7,000 new homes sold in the entire western United States during April.

Multi-family activity, on the other hand, has shown some small indications of renewed growth in the year-to-date totals. There has been much optimism within the multifamily industry about rent growth which in turn will lead to new construction. In spite of the optimism, however, few new construction projects have actually begun, and the April YTD totals is still slightly below 2009's total.

The third graph shows that April's permit total was up from 2010, but was still only about 50 percent of 2009's total. While March's permit total had shown one of the highest March totals in the past decade, April's numbers did not show similar strength.

Year-to-date totals in multifamily permits are at the second-lowest level seen at this point in the year since the 1990s. In previous posts, we have discussed the repercussions of such a small amount of new construction in multi-family housing. Since permits are a helpful indicator of future construction, it stands to reason that new construction will continue to be at historic lows for the short term, which will in turn drive up rents and keep vacancy rates low.

Permit activity suggested there is some hope among single-family homebuilders, however. April's permit total for single-family units was at a 3-year high, although it remains well below typical April totals reported over the past decade.

There were signs of renewed homebuilding activity in the April data, but in light of the the fact that YTD totals are below 2010's numbers, and given recent activity in new home sales, the trends behind new single-family are poised to remain sluggish.

We can note also that construction jobs have shown few signs of recovery, as can be seen here.