Starts are off from an earlier torrid pace, but year-to-date starts are up 7% compared to 2019 — the best numbers since 2007.

By Manuel Gutierrez, Consulting Economist to NKBA

New housing construction rose modestly in November, up just 1.2% to an annual rate  of 1.547 million starts. However, the previous month’s figure was revised upward to an increase of 6.3% from the previous estimate of 4.9%. These gains bring November’s pace in new residential construction very near the levels it had reached in January and February, when it averaged 1.59 million units a month.

New housing construction, and housing in general, remain one of the brightest spots in what might be called the “pandemic economy,” where several sectors continue to lag.

Both types of new housing — single-family and multifamily units —  increased in November, although single-family starts were up just 0.4% from the previous month.

Construction of units in multifamily buildings boosted the total, with a 4% rise for the month, equating to an annual rate of 361,000. The two graphs at the bottom of Fig. 1 show last year’s trend for total multifamily starts and their largest component: housing units built in properties of five or more units. The latter normally accounts for more than 90% of total multifamily units and, as Fig. 1 shows, was up 8% on the month. Construction of multifamily units in small buildings, defined as two to four units and not shown in Fig. 1, plummeted by 57% in November to just 9,000 units.

Year-to-date through November, 1.26 million housing units have been started, 7% higher than last year and the best performance since 2007. In that year, 22,000 more units were started during the same number of months. The improvement over last year is due to a 10% gain in single-family units, with 902,000 started through November, while construction of multifamily units is almost the same, just 0.1% above last year.

Regional Housing Activity Is Split

Two of the four regions enjoyed an increase in housing starts last month. The Northeast led, with total starts jumping by a whopping 59% to an annual pace of  135,000 units. The region accounts for less than 9% of the nation’s housing starts, however, so its effect on the total is minimal.

The West, the other region with positive starts, rose by 8% to a 407,000-unit pace. Its contribution to U.S. total housing starts exceeds 26%.

Gains in both those regions were offset by declines in the other two, especially the 6% drop in the South, which has an outsized effect since it contributes more than half of the nation’s starts. Total housing starts in the South fell to annual rate of 809,000 units, and in the Midwest, starts dropped by nearly 5% to a rate of 196,000 units.

On a year-to-date basis, only the Northeast has generated fewer housing starts this year, but the gap is just 3,300 houses, which is more than compensated by gains in the other three regions.

The single-family segment nationally is 10% above 2019 on a year-to-date basis. Regionally, three of the four regions experienced similar robust increases of around 10%, as illustrated in Fig. 2.

The smallest of the four regions, the Northeast, which accounts for 6% of the single-family homes built through November, rose by just 1% compared to first 11 months of last year.

Aside from this year’s gains across the four regions, most notable over the  longer term is the South, which has boasted steady annual gains since 2010.

The West displays a similar path as the South, except for a drop in starts last year. This year’s 11% increase in the West for single-family starts brings year-to-date activity higher than it was in 2019.

A different picture emerges regionally in the multifamily segment, however. Fig. 3 displays year-to-date housing starts for each of the four regions, back to 2008. Clearly, two of the regions, the Northeast and the West, have started fewer multifamily housing units so far this year than in 2019. The Midwest shows improvement while the South is essentially flat.

Although multifamily starts across all regions rebounded from the 2007-2009 recession in around 2010, they have not shown significant growth over the last few years. This is particularly the case for the Northeast and the Midwest, despite the latter’s substantial 22% jump this year.