Multifamily Construction Fuels Housing Starts
April housing starts saw an increase due in large part to a surge in multifamily construction. The starts rose above one million for the first time this year despite the fact that single-family activity is sluggish. The Commerce Department and HUD explained that privately owned housing starts saw a rate of 1.07 million. This is a 13.3 percent increase from March. Most of this spike came from apartment buildings which were started at a rate of 413,000, while the supply strained single-family market struggled.
A property economist for Capital Economics, Paul Diggle, commented, “The rise in multifamily homebuilding is part of a genuine long-term upward trend which reflects the rising share of the population renting, where multifamily accommodation dominates.” Modestly, single family groundbreaking was up only .8 percent over March.
While permits for new homebuilding was up 8 percent overall, single family permits only constituted .3 percent of these. This suggests that housing data may struggle for a few more months. Mark Vitner and Anika Khan, senior economists for Wells Fargo’s Economics Group, explained “Fewer completions mean completed inventories will remain low, which will continue to restrain new home sales. Moreover, with single family permits running well below starts, housing starts may give back some of their recent gain.”
David Crowe, NAHB’s chief economist, adds “The growth in multifamily production is a very positive development, as it shows an expected increase in household formations from young people renting apartments and taking the first step into the housing market. These young households will form the demand for ownership in the future.”