Comments on February Housing Starts

Earlier: Housing Starts decreased to 1.421 Million Annual Rate in February

It appears the poor weather in February impacted housing starts – the largest declines in starts were in the South and Mid-West regions.  Single family starts were up 38% year-over-year in the West (not impacted by poor weather).  Permits (unaffected by the weather) were up 17% year-over-year, and were up solidly in the South and Mid-West.

Total housing starts in February were below expectations, and starts in December and January were revised down slightly, combined. Single family starts decreased in February, but were still up slightly year-over-year. 

The volatile multi-family sector is down significantly year-over-year (apartments are under pressure from COVID).

The housing starts report showed starts were down 10.3% in February compared to January, and starts were down 9.3% year-over-year compared to February 2020.

Single family starts were up less than 1% year-over-year.  

Low mortgage rates and limited existing home inventory have given a boost to single family housing starts, but weather limited single family starts in February.

The first graph shows the month to month comparison for total starts between 2020 (blue) and 2021 (red). 

Starts Housing 2019 and 2020Click on graph for larger image.

Starts were down 9.3% in February compared to February 2020.  The year-over-year comparison will be easy in March, April and May.  

2020 was off to a strong start before the pandemic, and with low interest rates and little competing existing home inventory, starts finished the year strong.

Last December, I noted: “Don’t be surprised if starts are down year-over-year sometime over the next two months.”   So this year-over-year decline in total starts was not a surprise, especially given the harsh weather in February.

Below is an update to the graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market, and starts are important because that is future new supply (units under construction is also important for employment).

These graphs use a 12 month rolling total for NSA starts and completions.

Multifamily Starts and completionsThe blue line is for multifamily starts and the red line is for multifamily completions.

The rolling 12 month total for starts (blue line) increased steadily for several years following the great recession – then mostly moved sideways.  Completions (red line) had lagged behind – then completions caught up with starts- then starts picked up a little again late last year, but have fallen off with the pandemic.

Single family Starts and completionsThe last graph shows single family starts and completions. It usually only takes about 6 months between starting a single family home and completion – so the lines are much closer. The blue line is for single family starts and the red line is for single family completions.

Single family starts are getting back to more normal levels, but I still expect some further increases in single family starts and completions on a rolling 12 month basis.