2020 Housing Starts Outpacing 2019 by More Than 5%

Single-family starts power September to fifth straight monthy gain, while multifamily units lag.

By Manuel Gutierrez, NKBA Consulting Economist

Following an August drop in housing starts, builders cranked it back up. New home construction in September is pacing at an annual rate of 1.4 million units, up 1.9% from August. Despite this modest gain, starts remain lower than the 1.6 million unit annual rate seen at the beginning of the year.

At the pandemic low in April, the pace for new construction had fallen by 42%. Since then — in another indicator that the housing market is poised to lead the economy back — starts have recovered to the point that year-to-date through September, they are running 5.5% ahead of last year. For the first nine months of 2020, home builders have started construction of 1.02 million new homes.

Both new single and multifamily housing are ahead of last year. Single-family is doing better, however, with 716,000 new houses started so far, up 6.2%, while multifamily is up a slightly smaller 3.8%, with 300,000 units started in the first nine months.

Housing permits increased in September by a more robust 5.5%, to an annual rate of 1.6 million units. This increase suggests that new housing should remain strong over the next few months.

September’s overall small uptick in housing starts is the result of single and multifamily starts moving in different directions. Single-family starts rose by a robust 8.5% to a 1.1 million unit rate, marking its fifth consecutive monthly gain, but multifamily starts fell over 16% to 307,000 units.

The chart below shows that multifamily housing in buildings with five or more units dominates this sector. Small buildings with two to four units represent less than 5% of all multifamily houses for the month. In fact, year-to-date, houses in small buildings account for just 3% of all multifamily units.

September starts data reveal that three of the four regions contributed to the national gain. The Midwest is the only region with less housing activity than the previous month, falling by 33% to a rate of 165,000 units.

The largest gain occurred in the Northeast, where September starts jumped by 67% to a 145,000 unit rate. But this region typically represents under 10% of the nation’s housing starts.

The most dominant region, the South, generated a 6% increase in starts last month, accounting for 54% of the U.S. total, or 755,000 units.

It is important to view year-to-date housing construction activity, since it acts as a gauge for individual businesses performance. The table below illustrates the total of 1.02 million houses that have been started this year, a YTD increase of 5.5% so far, despite the pandemic.