December 2016 Construction Report

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December 2016 Construction Report

Total Residential Starts Jump while Permits Remain Flat

Thursday, February 2, 2017

Total residential starts and permits moved in opposite directions in December, according to the latest U.S. Census figures. 


Top Permit-Issuing Places Shift During Recovery

By the Numbers

  • The 1.21 million total residential housing units permitted in the 12 months ending in December were, on a seasonally adjusted annual rate (SAAR), down 0.2% from November and up 0.7% from December 2015.
    • At 817,000 units, the annual rate of single-family permits jumped 4.7% from November and 8.6% from last December. Single-family permitting topped 800,000 units for the first time since October 2007.
    • Multifamily permits dropped to 355,000 units, down 10.1% from November and 17.1% from December 2015. This is the second-lowest annual rate since June 2014.

Permits and Starts Snapshot

  • Total residential construction starts jumped 11.3% from November and were up 5.7% from December 2015 to 1.23 million units. The annual rate of total starts has oscillated up and down by about 10% or more each of the past four months.
    • Single-family starts of 795,000 units were down 4.0% compared to the previous month’s annual rate, but higher than last year’s rate by 3.9%.
    • Multifamily starts accounted for the December jump, with the annual rate increasing 53.9% from last month and 10.3% from December 2015 to 417,000 units. Multifamily starts exhibited some of the greatest volatility, even on a SAAR.
  • Total residential completions increased 8.7% from December 2015 to 1.12 million units, but were down 7.9% from November.
    • The 761,000 single-family houses that were completed on an SAAR basis were 0.9% less than November’s annual figure, but 7.5% higher than December 2015’s rate of 708,000 units.
    • The 355,000-unit annual rate for multifamily completions was down 19.3% from November, but was 12.3% greater than December 2015. 

Single-Family vs. Multifamily Permitting

Other U.S. Census statistics of note:

  • Total annual starts in December 2016 were up strongly from the December 2015 rate in the Midwest (38.4%) and West (32.9%). They were down sharply in the Northeast (-38.5%) and declined in the South (-3.2%).
  • Annual single-family starts were also up in the Midwest (13.4%) and West (13.5%) and down slightly in the Northeast (-1.6%) and South (-1.7%).
  • Multifamily starts continued to plummet in the Northeast (-63.4%), fell moderately in the South (-7.0%) and were up significantly in the Midwest (92.3%) and West (74.7%). 
  • Annual multifamily permits continued falling in the Northeast (-52.5%) and South (-29.5%), but rebounded in the Midwest (23.6%) and West (34.0%).
  • Annual single-family permits declined only in the Northeast (-5.2%), while the Midwest (8.0%), South (10.0%) and West (19.5%) experienced increased activity.
  • The annual rate of total permits declined in the Northeast (-37.2%) and South (-2.4%), pulled down by annual multifamily permits, but the West (25.0%) and Midwest (13.2%) had strong gains. 
  • Multifamily completions decreased (on a SAAR) from December 2015 only in the West (‑56.1%), while the Midwest (86.8%), South (41.5%) and Northeast (53.7%) completed significantly more units than 2015. Single-family completions were up in the South (12.9%), Northeast (4.1%) and West (2.5%), but were down in the Midwest (-1.7%). 

Top Permitting Metros Relatively Steady

The top 10 Metropolitan Statistical Areas for multifamily permitting for the 12 months ending December 2016 were:

Six of the top 10 metros remained the same and in the same order as in November, but the next four changed positions. Austin dropped from No. 7 last month to No. 12 in December, while Washington, DC moved into the No. 7 spot. Houston dropped from No. 8 to No. 10, but Chicago moved up from No. 10 to No. 9. Phoenix replaced Austin on the top 10 list, moving to No. 8 from No. 11 in November.

Half of the top 10 metros issued fewer multifamily permits in the 12 months ending in December 2016 than they did the year before. New York is still plunging from its 421-a bulge last year with a percentage drop of 62.2%, followed by Houston’s drop-off of 54.4%.  Dallas, Los Angeles and Seattle continued to slow, while Atlanta, Denver, Phoenix and Chicago had moderate gains in multifamily permits.

With these declines, the annual total of permits issued in the top 10 metros – 133,589 – was 26% lower than the 181,578 issued in the previous 12 months for the current top 10. Comparing the same metros that comprised the top 10 last month, the falloff was 28%. Multifamily permits had been heavily concentrated in the top 10 metros, but multifamily construction is ramping up in several smaller markets as it slows in some of the top markets.

The total number of permits issued in the top 10 metros was almost equal to the number of permits issued within the 11th -35th ranked metros. A year ago, permits issued in the top 10 metros almost equaled the 11th -70th ranked markets.

Access the latest permit trends tables in Excel format here.

Please contact us if you have any questions.

Jay Denton

SVP Analytics 

KC Sanjay

Senior Real Estate Economist 

Chuck Ehmann

Real Estate Economist 

Top Permit-Issuing Places Shift During Recovery

The last table in our monthly Construction Report is always the list of the top 40 multifamily permit issuing places ranked by annual (rolling 12-month) multifamily (5+ units) building permits in units. There are about 20,100 permit issuing places in the Census’ survey, which include individual cities, towns, counties and other jurisdictions from which permitting data are collected. Roughly 5,000 permit-issuing places appear in the master table from which we draw the top 40 each month. Of those, about 1,000 have issued permits for at least five or more multifamily units within the past year.

The following set of tables lists the top 10 multifamily permit issuing places (and their metropolitan areas) each December since the recovery from the Great Recession began in earnest in 2012. Most of the places in the top 10 list are municipalities or cities, but a few counties (or boroughs) and unincorporated county areas made the list. Some of the cities that appear in the 2016 list are also consistently in the top 10 historically. The cities of Dallas, Houston, Los Angeles, Austin and Seattle have made the top 10 list each of the past five years.

Top MF Permitting Places 2012-2016 

Other permitting places jump onto or off of the list for various reasons. For instance, the impending and subsequent expiration of New York’s 421-a tax-abatement policy caused a sudden surge in multifamily permitting throughout the New York metro area and caused the boroughs of Manhattan, Brooklyn and Queens to dominate the top 10 list in 2015. But they disappeared from the list by the end of 2016.

Charlotte’s Mecklenburg County appeared in the top 10 list from 2012-2014, as that area was one of the first to benefit from the moderate post-recession economic recovery and a dearth of new single-family construction. The individual cities of Denver, San Jose, Raleigh, Atlanta and Miami have worked their way onto the top 10 permit places list over the past five years, as well.

The City of Houston placed No. 1 or No. 2 from 2012-2014 but dropped to No. 6 in 2015 and No. 8 in 2016 as reduced demand from the oil-price collapse caused developers to pull back from this market. Unincorporated Harris County (essentially the area surrounding the City of Houston) made the top 10 list from 2013-2015, moving from No. 7 to No. 5 and back down to No. 9 before falling off the top 10 list in 2016 for the same reason.

Charting the top 10 permitting places from 2012-2016 reveals the drop-off from the No. 1 spot to No. 10 has been pretty consistent, again with the exception of 2015 (although the City of Houston was 60% higher than No. 2 City of Los Angeles in 2014).

Top 10 Permit Places by Year Chart

The lines representing the top 10 permitting places each year are also close together in values, with 2015 showing itself to be the peak year for multifamily permits across the board, primarily due to the 421-a phenomenon. A total of 115,068 multifamily units were permitted in the top 10 places in 2015, followed by 76,563 for 2016.

Subtracting an estimated 30,000-35,000 multifamily units permitted because of 421-a that would likely have been spread out over the next several years (if at all), the remaining 80,000-85,000 units for 2015 still indicates a peak year. In fact, the cities of Dallas, Los Angeles, Austin and Seattle all permitted fewer multifamily units in 2016 than the year before.

By the Numbers

The table below shows multifamily permitting and job gain/growth for some of the top metropolitan areas, with several categorized by state or region.

Major Metro Permitting and Jobs

The table below highlights multifamily permitting by place. Some of the top places on a trailing 12-month basis through December 2016 were:

  • City of Los Angeles (11,339 units)
  • City of Seattle (8,539 units)
  • City of Dallas (8,483 units)
  • City of Chicago (7,998 units)
  • City of Atlanta (7,166 units)
  • City of Denver (5,555 units)
  • City of San Diego (5,458 units)
  • City of Houston (5,235 units)

The top 40 places (out of 4,147 U.S. Census places) for permitting of properties with five or more units were:

Top 40 Permit Places

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