March housing starts were about as expected when including the February revision. With this number though it’s most important to look under the hood to see the breakdown between single family and multi. Single family starts rebounded to 861k from 838k in February, 823k in January and vs 881k in December. Multi family starts, the more volatile monthly component, totaled 559k vs 594k in February, 511k in January and vs 467k in December.
As for the forward looking permits figures, single family bounced back to 818k from 786k in February and that is the most since last October. Multi family permits shrunk to 595k from 764k in February which was the 2nd most since 1986. While there is a huge amount of multi family supply coming our way, it is almost all from existing projects. You can be sure, and I’ve heard of a bunch, that many now have pencils down on new multi family projects where the numbers don’t make sense anymore with the jump in financing costs and plateauing of rental growth.
Bottom line, expect very little NEW multi family construction while everything already underway gets done and the market digests the large supply. With respect to single family, with the still dearth of existing home supply, we need more but we’re just not getting enough of the cheaper stuff that would entice first time buyers to buy instead of rent. As for single family generally, order numbers are down as to be expected with a more than 6% mortgage rate on top of the sharp rise in prices over the past few years. So we have this weird market of bidding wars for existing homes, modest new building and overall affordability issues that remain a problem. Big builders have the balance sheet to keep building on spec while smaller builders can only afford now to build to order because banks are pulling back on construction loans.
Single Family Permits
Multi Family Permits