New Home Construction Highs and Lows in March

by Peter Thomas Ricci

April 17, 2014

Housing construction performed below expectations in March, according to the latest Census Bureau numbers.

March was a month of good and not great news for new construction, according to the latest Census Bureau report, with housing starts rising 2.8 percent from February to a seasonally adjusted annual rate of 946,000 – but still down 5.9 percent from March 2013.

That continues 2014’s sluggish pace, which has seen new construction taking a step back from its 2013 performance.

Nuance in the New Construction World

Of course, the Census Bureau’s report extended far beyond national housing starts. Other information from the report included:

Single-family housing starts in March were up 6.0 percent from February, though the estimated rate of 635,000 is just 2.5 percent above March 2013’s rate.
Building permits, meanwhile, were down 2.4 percent from February, but up 11.2 percent from last year; single-family authorizations were up 0.5 percent month-to-month.
Finally, housing completions were down 0.2 percent monthly but up 7.7 percent yearly to a rate of 874,000, though single-family completions were down 3.8 percent monthly.

The Multifamily Factor

Clearly, this was a schizophrenic month for new construction, and we have one party to blame for that fact – multifamily housing. Notoriously irascible, the multifamily housing sector’s performance differs wildly month to month, so just as we can occasionally thank the sector for massive gains, we also have to blame it for disappointing losses.

And thus was the case with March, which saw multifamily starts fall 6.4 percent monthly and 25.5 percent yearly. Permits were also down 9 percent monthly, though completions jumped 4.8 percent as well, pushing new rental units to their highest supply in more than four years.

Of course, if the new construction sector was operating at historic levels, multifamily’s performance would not be much of an issue, but with vacancy rates in single-family housing still high (and with lots sparse and so many consumers unable to secure loans for purchases), multifamily rental construction remains disproportionately strong; indeed, at 30 percent of all starts right now, multifamily is still considerably stronger than it was in the 1990s and 2000s, when it made up 20 percent of all starts.