Here are a few thoughts on July’s New Residential Construction data release, as well as highlights from our mid-year homebuilding report, released today.
- July’s new construction numbers disappoint. All three of the major new construction indicators – permits, starts, and completions – fell from last month.
- The disparity in homebuilding across the U.S. is striking. Just three Texas metros – Dallas, Houston, and Houston – are on pace to build more than 40,000 homes each this year, while several markets in the Northeast – such as New Haven, Conn., and Allentown, Pa., – will struggle to break ground on more than 500.
- The disappointing news for homebuyers is not that multifamily starts are down, but rather that single-family has barely nudged up much in the past few months. With homeownership on the rise for young households, we need more one-to-four unit construction to help keep up with demand.
New housing permits, starts and completions in July were down sharply from last month’s strong report, dropping by 4.1%, 4.8% and 6.2%, respectively. This puts each at 66.2%, 59.5%, and 63% of their 50-year average, respectively. The silver lining for new homebuyers is that most of the construction pullback is in the multifamily sector, where economists have been expecting an eventual slowdown given the charge of multifamily units coming out of the recession. To put the fall in perspective, multifamily permits, starts and completions fell 12.1%, 17.1% and 14.9% respectively, from last month.
These numbers, however, mask substantial variation in homebuilding at the metropolitan level. To provide more detailed insight, we released today our mid-year report, “Who will win the homebuilding race of 2017?” We found that just three metros in Texas – Austin, Dallas, and Houston – are on pace to build nearly 130,000 homes, which amounts to one in 10 of all U.S. homes this year. That’s more than 45 other large metros combined. Other markets punching above their historic weight include Nashville, Tenn., Boston, San Jose, Calif., and San Francisco. This is in stark contrast to metros in the Northeast, such as Worcester, Mass., New Haven, Conn., and Allentown, Pa., that will struggle to break ground on more than 500 this year. What separates building towns from idle ones? Employment, income, and price growth. The more a market has recovered in these areas, the more homebuilding it’s doing relative to its historic average. The complete report can be found here.
