November 2016 Construction Report

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November 2016 Construction Report

Multifamily Starts and Permits Plunge in November

Wednesday, January 4, 2017

Multifamily Starts and Permits Plunge in November

Multifamily construction starts and permits both dropped sharply in the 12 months ending in November, compared to October, according to the latest U.S. Census figures.


Go West (or East)

By the Numbers

  • Some 259,000 new multifamily housing units were started from December 2015-November 2016 on a seasonally adjusted annual rate (SAAR).
    • That figure represents a decrease of 43.9% from October’s annual rate and 31.7% from the November 2015 figure.
    • This is the second-lowest annual rate for multifamily starts since June 2013.

  • Multifamily permits of 384,000 units returned to the levels of February-August after September and October’s strong performances.
    • That rate was 15.8% lower than October’s annual rate and was down 26.4% from November 2015.

  • Single-family starts and permits were also weak compared to the previous month’s annual rate, but higher than last year’s rates.
    • The 828,000 houses that began construction on an SAAR basis were 4.1% less than October’s annual figure, but 5.3% higher than November 2015’s rate of 786,000 units.
    • The 778,000-unit annual rate for single-family permits was up 0.5% from October (essentially unchanged) and 5.9% greater than November 2015.

  • The sharp drop in multifamily permits and starts caused total residential permits and starts to fall as well.
    • Total residential starts were 1.09 million units for the 12 months ending in November, the 20th consecutive month to exceed 1.0 million units. However, November’s SAAR represented an 18.7% decrease from October, and a 6.9% decrease from November 2015.
    • The 1.2 million total residential permits (SAAR) were down 4.7% from October and 6.6% less than November 2015. Annual total residential permits have exceeded the current 12-month average of 1.17 million units for the past three months.

On a bright note, total residential completions of 1.216 million units were up 15.4% from last month’s revised annual rate of 1.054 million and were 25.0% higher than November 2015. Single-family completions jumped 20.6% from last November to 774,000 units, and annual multifamily completions jumped 36.3% from November 2015 to 432,000 units.


Other U.S. Census statistics of note:

  • Total annual starts in November 2016 were up from the November 2015 rate only in the Midwest (3.6%). They were down in the Northeast (-36.0%) and South (-6.9%), and unchanged in the West region.

  • Annual single-family starts were also up in the Midwest (33.0%) and in the South (3.8%), but down in Northeast (-7.6%) and West (-2.7%) regions.

  • Multifamily starts continued to plummet in the Northeast (-67.8%), fell sharply in the Midwest (-50.0%) and South (-31.2%), but were up in the West (6.3%). 
  • Annual multifamily permits fell in all regions, led by the Midwest (-34.7%), South (-30.1%), Northeast (-17.9%), and West (-6.3%).

  • Annual single-family permits declined only in the Northeast (-3.5%), while the Midwest (13.9%), West (8.6%), and South (3.8%) experienced increased activity.

  • The resulting annual rate of total permits showed declines in the Northeast (-11.3%), Midwest (-9.6%), and South (-9.0%) regions, pulled down by annual multifamily permits. The West had a moderate gain of 1.9% in total residential permits (SAAR). 

Multifamily completions decreased (on a SAAR) from November 2015 only in the West (-61.5%), while the Midwest (110.3%), South (94.7%), and Northeast (48.1%) completed significantly more units than last year. Single-family completions were up strongly in the Midwest (52.4%), South (20.9%), and West (14.3%), but were down in the Northeast (-14.8%). 

Permits Down in Half of Top 10 Metros

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

As with last month, all of the top 10 returned, but the order changed again. The top five remained the same and in the same order, while Houston dropped from No. 6 to No. 8. Denver and Austin each jumped up two spots to Nos. 6 and 7, respectively. Chicago slid from No. 7 to No. 10, and Washington, DC moved up from No. 10 to No. 9.

Half of the top 10 metros issued fewer multifamily permits in the 12 months ending in November 2016 than they did the year before. Despite the sharp falloff in New York from its 421-a bulge last year, the percentage of Houston’s decline from last year was greater (55.2% vs. 50.6%). Dallas, Los Angeles and Seattle also are moderating.

Because of these declines, the annual total of permits issued in the top 10 metros – 139,515 – was 23% lower than the 181,269 issued in the previous 12 months. 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 -37th ranked metros. A year ago, permits issued in the top 10 metros almost equaled the 11th -77th 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


Go West (or East)

Among the many data points collected by the U.S. Census Bureau is the mean center of population for each decade that a census has been conducted. In essence, this represents a “center point” for national population distribution.  Unsurprisingly this center point has steadily shifted westward throughout the nation’s history.

Tracking multifamily development from before the 20th century through today would presumably show a similar trend. However, trends can (and do) change. Preference for particular housing types (i.e. single-family vs. multifamily), external macroeconomic influences, demographic trends, and general scale of building all influence where and what types of housing units are being built.

So, if a “center point of multifamily development” were to be created, what would the distribution look like? And how would this deviate from the overall population distribution? 

Generally speaking, the assumption that the center point of multifamily development follows the center point of population holds true - especially early in the 20th century. Some deviations in center of multifamily development showed up in the 1930s and 1940s, which may be partially explained by larger socioeconomic and broader national events.

The first phenomenon was the Dust Bowl. The mean population shifted very little during the 1930s, which highlights the large amount of people fleeing the drought-stricken states in the heart of the country. During this same time, populations farther east may have slowly continued a westward trend, but those living in the so-called “flyover states” were moving back east in light of the Dust Bowl.

The second phenomenon occurred in the 1940s, primarily after World War II. As the war ended, a vast number of soldiers returned home with the need for housing. While many veterans opted for single-family homes (as evidenced by Levittown, NY – widely considered to be the forefather of “modern suburbia”), the need for additional multifamily development also existed because of the sheer increase in population.

The center of population continued to shift westward in the 1950s, and multifamily construction followed. The population also took a slight southern shift during this decade, dictated in part by the increasing number of households reliant upon air conditioning. As air conditioning became more commonplace, what were once uncomfortably hot climates (if not altogether unlivable) became more livable.

The widespread embrace of air conditioning and the abundance of land out west (which made building suburban areas far easier) helped the population continue to shift westward throughout the 2010s – though the U.S. Census Bureau found that the shift of population as of 2010 is the smallest such shift westward since the 1930s.

While multifamily development shifted to the south and west during many decades, another trend began to emerge around 1980.

The westward shift in the center of multifamily development in the 1980s is one of the largest shifts on the map. Centered near Polo Township, AR in the 1970s, the center point for multifamily development in the 1980s moved 260 miles to the west. This is largely explained by a continued shift to suburbanized areas – particularly those in states west of the 94th Meridian (i.e. the eastern half of Texas).

Unlike the population center, which continues to move westward, the 1980s center point for multifamily construction is the farthest west the point has been. The 1990s saw a shift from central Oklahoma back toward Arkansas/Missouri to the northeast. Another notable shift through the 2000s is evidenced by the north-northeast movement from the Ozarks in northwest Arkansas to Springfield, MO.

What might this shift in the center of multifamily development suggest? If the population is moving westward, why is multifamily development tracking in the opposite direction?

Meanwhile, the center of development for properties under construction or in the planning phase also has been shifting eastward. In fact, the point is relatively close to the 1960s point – even closer than it is to the current center point. 

A partial explanation may be the excess building in a handful of western U.S. metro areas during the housing bubble of the late 2000s, including Phoenix, Los Angeles and Las Vegas, among others. These metros were some of the hardest hit when the bubble burst, which may suggest two things:

  • Most of the construction in these western metros was single-family housing. Although some multifamily development took place, there was a glut of single-family construction in the western U.S. As such, the construction of multifamily properties is somewhat more “weighted” back to the east during this time. (A graph showing the huge gap between single-family and multifamily construction activity in Phoenix illustrates this.)

  • After the housing/financial crisis, many developers have maintained a “once bitten, twice shy” mindset in these western metros. However, most developers who jumped in on multifamily construction in these metros have been rewarded in recent years, as rent growth has been exceptional.

Adding to this northeastern pull is the large volume of permits issued in the New York City area through the (possibly temporary) expiration of 421-a, a tax abatement law that encouraged developers to submit permits for new multifamily product in the market under certain provisions. 

Taken in toto, the simultaneous population shift toward the western United States and the reverse trend of multifamily development geographically, shows that the general population is taking Horace Greeley’s oft-quoted advice to “Go West”, while apartment developers follow a different path.

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.

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

  • City of Los Angeles (11,561 units)
  • City of Dallas (9,092 units)
  • City of Seattle (8,954 units)
  • Borough of Brooklyn (8,176 units)
  • City of Chicago (7,610 units)
  • City of Atlanta (7,383 units)
  • City of Denver (6,503 units)
  • City of Austin (6,090 units)

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

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