Housing starts in April totaled 1.724mm, 30k less than expected and March was revised down by 65k to 1.728mm. Separating out the two components, single family starts fell to the lowest level since October 2021 at 1.1mm. Multi family on the other hand rose to 624k from 541k and that is the most since 1986, 36 years ago. From a construction standpoint, assume multi family is using steel for framing where availability is greater rather than lumber and the economies of scale in building units is better than constructing an individual home. Now that said, putting the shovel in the ground is one thing, finishing the project in today’s environment is another because of the shortages still of key things like garage doors and major appliances.
Permits were about as expected with a drop to the lowest since November. Single family permits are at the lowest since last October. Multi family permits fell slightly m/o/m but remain still above 700k.
Bottom line, it’s tough here to differentiate the slowing rate of single family starts between slowing demand because of high prices and mortgage rates and the still challenging supply side situation but It’s of course a combination of both. Also, as speculated here and elsewhere, are we on the cusp of building too many new homes relative to the anemic household formation growth figures? With respect to multi family, the business is red hot and while the supply is definitely coming, finishing these projects will take a lot longer than it would have pre covid. On the valuations of multi family properties and reits, the question is whether rent growth strength can continue to offset the rise in cap rates.
Single Family Starts
Multi Family Starts
Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor. Each day The Boock Report provides summaries and commentary on the macro data and news that matter, with analysis of what it all means and how it fits together.