Industry News

Market Reporting that Matters

June 2017 Construction Report

Multifamily Construction Up for Month, Down for Year

Wednesday, August 2, 2017

After three straight months of declines, annual total residential starts and permits rebounded in June from the previous month at a greater rate than expected, according to the latest U.S. Census figures, though the annual number of multifamily units authorized was down from one year prior.



Has the Single-Family Market Returned?

By the Numbers

  • The 1.254 million total residential housing units permitted during the 12 months ending in June were, on a seasonally adjusted annual rate (SAAR), up 7.4% from May and up 5.1% from June 2016.
    • The annual rate of single-family permits increased by 4.1% from May to 811,000, and was 9.2% higher than the June 2016 annual rate. Single-family permitting returned above the 800,000 unit-level after two months below it.
    • Annual multifamily permits rose 14.6% from May’s annual rate to 409,000 units, which was 2.4% less than June 2016. Multifamily permits exceeded 400,000 units for only the second time since November 2016.
  • Total residential construction starts of 1.215 million units in the 12 months ending in June were 8.3% greater than May and 2.1% higher than June 2016. The annual rate of total starts surpassed 1.2 million units after three straight months below that mark.
    • Annual single-family starts of 849,000 homes were 6.3% higher than May and 10.3% greater than June 2016.
    • Multifamily construction starts of 359,000 units were up 15.4% from May’s revised rate of 311,000, but were 10.7% lower than June 2016. Annual multifamily starts have averaged 375,000 units for the past 12 months.
  • Total residential completions were 1.203 million units, 5.2% higher than May and 8.1% higher than June 2016.
    • Single-family completions barely increased on an SAAR basis from May (up 0.4%), but were 5.0% higher than the June 2016 annual figure.
    • Multifamily completions are gaining momentum, increasing 17.9% from May and 15.1% from June 2016 as the market edges closer to its cyclical peak.


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Other U.S. Census statistics of note, comparing June 2017 to June 2016 annual rates:

  • Total annual starts in June 2017 were up strongly in the Northeast (38.6%) and moderately in the Midwest (9.0%) and West (6.0%). They were down 9.2% in the South.
  • Annual single-family starts were up by double digits in the West (22.4%) and Midwest (17.5%), and moderately in the South (8.5%). The Northeast fell by 19.2%.
  • Multifamily construction starts declined by half in the South (-50.9%) and were down in the West (-13.6%) and Midwest (-0.4%), but were up strongly in the Northeast (166.4%).
  • Annual total permits were up in the Midwest (21.8%), West (9.5%) and South (1.8%), but declined in the Northeast (-12.5%).
  • The annual rate of single-family permits increased in three regions, led by the South (10.7%) and followed by the Midwest (9.1%) and West (8.6%). The Northeast was flat with the same number of homes permitted as last year (58,000).
  • Annual multifamily permits jumped in the Midwest (50.2%) and increased in the West (10.8%), but decreased sharply in the Northeast (-29.0%) and South (-16.4%).
  • Single-family completions increased by double-digits in the West (20.5%) and were up modestly in the South (3.3%), but declined in the Midwest (-4.3%) and Northeast (-3.2%). Multifamily completions almost doubled (on an SAAR basis) in the West (81.7%) and increased in the Midwest (72.5%), but declined in the South (-24.1%) and Northeast (-10.2%).


Few Changes in Top 10 Permitting Places

The top 10 Metropolitan Statistical Areas for multifamily permitting for the trailing 12 months ending June 2017 were:

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The top 10 metros remained the same as they did in May, with the first five returning in order. Chicago moved up to No. 6 from No. 9, displacing Atlanta, which moved to No. 8. Austin remained at No. 7 as Phoenix moved down two spots to No. 10. Washington, DC improved one spot to No. 9.

Only three of the top 10 metros issued fewer multifamily permits in the 12 months ending in June 2017 than they did in the preceding 12 months. Dallas and Atlanta each had double-digit declines in multifamily permits: -11.4% and -29.2%, respectively, while Washington, DC declined only moderately (-4.5%). Houston continued to pull back on permits, dropping to No. 16 with a -52.7% decline from last year, joined by Anaheim (-55.7%) and Nashville (-54.5%) as major markets with steep multifamily permitting declines from last year.

Development is ramping up in Minneapolis-St. Paul, Denver and Chicago, as each permitted 3,600-4,200 more units than last year, with percentage increases averaging more than 66%. Los Angeles, Oakland, Reno, Seattle and Raleigh also had double-digit gains in multifamily permits with at least 1,500 more units than last year.

Despite annual declines in three of the top 10 apartment markets, the annual total of multifamily permits issued in the top 10 metros – 141,907 – was 5.4% greater than the 134,696 issued in the previous 12 months. The total number of permits issued in the top 10 metros was almost equal to the number of permits issued within the 11th-38th ranked metros. A year ago, permits issued in the top 10 metros almost equaled the 11th-35th ranked markets.

Access the latest permit trends tables in Excel format here.

Please contact us if you have any questions.

Jay Denton
Vice President

KC Sanjay
Sr. Real Estate Economist
Chuck Ehmann
Real Estate Economist


Has the Single-Family Market Returned?

The U.S. single-family industry suffered a severe blow when the housing bubble collapsed, resulting in the financial crisis that was the Great Recession.

However, single-family building permits and new-home sales figures have risen steadily after bottoming from 2009-2010. The months of supply (MOS) figure also has dropped sharply, averaging 5.3 months since July 2013.

Does that mean that the single-family market is back? It depends on how you measure it.

As seen in the following chart, annual seasonally adjusted, single-family building permits (by month) have rebounded, while new-home sales have followed suit. New-home sales figures -- from the Survey of Construction from the U.S. Census Bureau and Department of Housing and Urban Development -- consist of homes built for sale (or speculatively built) and excludes contractor-built (or custom-built), owner-built and built-for-rent homes. That is why there is a large gap between permits and sales in the chart. The months' supply figure is the ratio of houses for sale to houses sold. It indicates how long the current for-sale inventory would last given the current sales rate.

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The current annual pace of permits and sales are comparable to the early 1990s. Even the current MOS is similar to the level of 1992-1993. However, we have not returned to the 1990s.

The rate of growth or growth trend is another measure of the health of the single-family market. The following chart shows the growth trends for different periods back to 1963. National recessions are shaded gray.

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From 1963-1990, annual single-family permitting grew at an average of 3.7% per year. Several national recessions dampened the overall growth rate in that period. Single-family permitting picked up after the 1980s and grew by an annual average of 5.0% from 1991-2000. The growth of the housing bubble from 2001-2005 (7.1% annual growth) and bubble bust and Great Recession that followed (-20.4%) are not trended, but the growth trend from 2011-present shows an annual average growth rate of 9.8%.

If you measure the single-family market only in terms of annual growth, then the current recovery period appears best, but this is a bit misleading as the number of single-family units permitted is smaller than the 1991-2000 period. We measure growth from a smaller base. The current annual rate of about 800,000 homes permitted is two-thirds the annual rate of 1.2 million homes reached a few times in the 1970s, 1980s and late 1990s, and less than half the peak level of 1.8 million homes at the top of the housing bubble – a level that probably will not be matched in the foreseeable future.

Based on the growth rate of permits and new-home sales, the single-family market appears well on its way to a full recovery, although the number of units has yet to reflect that. There are still headwinds the industry must overcome, such as rising mortgage rates, labor and materials shortages, tighter (but improving) credit and lending standards, limited inventory of affordable homes, student debt burdens, et al.


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.

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The table below highlights multifamily permitting by place. Some of the top places on a trailing 12-month basis through June 2017 were: 

  • City of Los Angeles (12,343 units)
  • City of Chicago (9,650 units)
  • City of Denver (8,750 units)
  • City of Seattle (7,735 units)
  • City of Austin (7,165 units)
  • Borough of Brooklyn (6,068 units)
  • City of Dallas (5,762 units)
  • Borough of Manhattan (5,685 units)
  • City of Miami (5,430 units)

The top 40 places (out of 5,073 U.S. Census places) for permitting of properties with five or more units were:

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