2017 Best Year for Housing Starts Since 2007

• When it comes to new home building activity, 2017 turned out to be the best year for permits, starts, and completions in a decade. The continued climb was led by single-family homes, which was exactly the type of new inventory frustrated homebuyers yearned for last year. Elevated levels of homebuilders’ confidence combined with persistent low inventory should make 2018 a ripe year for single-family construction to grow.
• New construction last year would have been even higher had it not been for a sharp slowdown in multifamily permits and starts. While we applaud new multifamily construction in helping moderate rents over the past few years, we see the slowdown as a healthy retreat that will continue this year.
• While 2017 was the best year for homebuilding in a decade, much of the inventory crunch confronting homebuyers over the past two years is reflective of the dearth of homebuilding since the recession. To put the past year into perspective, permits, starts, and completions relative to the US population was just 64.9%, 58.8%, and 57.9% of the 50-year average. Clearly, new construction would have to pick up substantially this year to make much of a dent in our inventory woes.

New housing permits in 2017 were the most in a calendar year since 2007, finishing off with a total of 1,263,400 authorizations. While 2017 was a great year for permits, they were just 64.9% of the 50-year average when taking into account the size of the U.S. population. Much of the increase in permits last year was due to a sharp increase in single-family homes from 750,800 in 2016 to 817,700 in 2017, which represents a gain of 4.7%. Multifamily permits, on the other hand, floundered, falling from 421,000 in 2016 to 410,300 last year, which is a 2.5% drop. With for-sale inventory continuing to fall and rents moderating, we expect these trends in permitting activity to continue this year.