Thursday, January 19, 2012

Housing starts in U.S. West flat, multifamily starts up slightly

Housing starts in the West Census region of the US, which includes Colorado, were unchanged from a year earlier during December, counting both single-family and multi-family units. According to new housing construction and housing starts data released today by the US Census Bureau, there were approximately 8,700 housing units started in the West during December 2011. Of the new units started, 5,700 were single-family structures and 3,000 were structures containing more than one housing unit.

Nationally, housing starts rose 23 percent during the same period, with total housing starts rising to a total of 41,800.

Total housing starts remain well below peak levels both nationally and in the West. December 2011 housing starts in the West were 84 percent below the peak reached during May 2004. Nationally, December 2011 was 78 percent below peak levels. The national peak in housing starts was reached during May 2005.

Multifamily starts have rebounded more than single-family starts. In the West, single-family starts are 88 percent below peak levels while multifamily starts are only 70 percent below peak levels.

The West census region includes California, so given the size of the West census region, the fact that total housing starts are at 8,700 indicates that new home construction continues to be very light throughout the region. Housing starts totals ranging from 35,000 to 45,000 were common from 2004 to 2006.

The first graph shows the difference between single-family starts and starts for structures with more than one housing unit. Both remain near ten-year lows, and single-family starts fell 1.7 percent from December 2010 to December 2011. Starts for structures with more than one unit, however, increased by 3.4 percent during the same period, rising from 2,900 units during December 2010, to 3,000 units during December of this year. Given recent data showing strength in the demand for rental-housing, the housing starts data may suggest that developers of rental housing are beginning to move forward with construction of new multifamily structures. Nevertheless, the weakness in growth during December suggests that new starts in multifamily units continue to face headwinds.

The second graph shows month-by-month comparisons in housing starts for each year in the West. December's housing starts total was a 29 percent decrease from November. Nationally, the decline during the same period was 19 percent. These month-over-month declines produced gloom among industry representatives who took the declines to mean a lack of hoped-for growth in housing starts.

As can be seen in the second graph, December housing starts were tied for the second-lowest December total reported during the past decade, and was the lowest total reported since February 2011.

More sustained growth was visible in starts for structures with more than one housing unit. December was the fourth month in a row in which multifamily housing starts grew, year over year. As can be seen in the third graph, the December 2011 multifamily total for starts has exceeded the totals for both 2009 and 2010 but remains below every other December total since 2002.

This data suggests that multifamily starts have established a clear growth trend over the past several months, but that this will not proceed without some weak spots, as was seen during December. Single-family starts clearly continue to face obstacles to recovery.