Today’s government data release on housing starts showed a 14.4% decline in the month of August, mostly driven by multifamily. Single-family detached home construction was only down 2.4% on the month. Total starts are still 8.0% higher than August of last year, and single-family starts are still 4.2% above the year-ago pace.
The apparent stagnation in national housing starts is not universal. Looking deeper, and using Metrostudy’s more granular detail, we see that certain markets have seen considerable strength. In our local-market tracking, we are still seeing significant gains versus a year ago in Atlanta (+16.2%), Nashville (+11.0%). Southern California is also up sharply compared with this time a year ago (+16.7%), and Chicago has pulled itself up a bit from its recently extremely low levels as well (+15.4%).
New home production has gyrated month-to-month, but all in all, this has been a "flat" year, as measured by the Census Bureau data. Totaling all housing starts in 2014, the number is only going to end up a few percentage points higher than in 2013.
Builder sentiment is still improving, reflecting the adjustment of home buyers to the higher level of home prices, and higher confidence in their personal finances. Job growth is still erratic, but generally trending higher, and overall spending power of consumers is up.
Single-family starts fell 80% during the downturn, and have since only made it back to about 50% of “normal.” Improving demand, combined with a need for public homebuilders to open more communities, will push the level of starts higher by 15% to 20% next year.
In thinking about the forecast, it is vital to look not just at home production, but also at the demand for new housing. We measure demand the hard way: we drive new subdivisions counting curtains and welcome mats. The pace of move-ins has risen almost 10%, comparing projected calendar year 2014 with actual calendar year 2013. That shows that the increases in housing starts is justified by bona fide user-driven demand.