The Census Bureau released its monthly new residential construction report for May 2020. It shows the start of a rebound in multifamily housing construction.
Permits pick up
The number of permits issued for buildings with 5 or more units rose in May to 434,000 units on a seasonally adjusted, annualized basis. This was up 18 percent from the revised figure for April. However, May permits were down 8 percent from the number of permits issued in May 2019 and were down by 5 percent from the average monthly level for 2019 as a whole.
In addition, 41,000 permits were issued in March for buildings with 2 to 4 units. This was up 24 percent, from the previous month and was in line with recent levels of permit issuance.
Regional data for multifamily housing is only reported for structures with two or more units. “Structures with 5 or more units” is not broken out as a separate category. Since the regional data is highly volatile and is frequently revised, it is examined here based on three-month moving averages. This averaging will tend to smooth out the effects of sudden shocks like the shutdowns in reaction to the COVID-19 pandemic.
Nationally, the three-month moving average for permits issued for multifamily housing in May was up 2 percent from the April level but was down 8 percent from the level of May 2019. This is shown in the first chart, below. The three-month moving average came it at 449,000 units, 10 percent below the trailing 10 month average.
On a month over month basis, permit issuance was up 6 percent in the South but changed by less than 2 percent in other regions of the country.
Compared to year-earlier levels, the three-month moving average of permits was nearly unchanged in the South. The three-month moving averages of permits fell by 22 percent in the Northeast, 18 percent in the Midwest and 9 percent in the West compared to their levels in May 2019.
The following chart shows the three-month moving averages of permits by region for the last 25 months.
Multifamily housing construction starts show life
Revisions to earlier-reported figures in the May report saw starts for March revised downward and the very weak preliminary report of starts for April revised upward. The preliminary report for May finds starts in buildings with 5 or more units per building rising 17 percent from the revised April figure to a level of 291,000 units on a seasonally adjusted, annualized basis. This figure is down 33 percent from the figure for May 2019.
Multifamily housing construction starts (two or more units per building) in May were down 20 percent from their April levels for the country as-a-whole, based on three-month moving averages. Starts were down 4 percent in the Midwest, 7 percent in the West, 25 percent in the South and 38 percent in the Northeast.
The three-month moving average of starts were down 23 percent for the country-as-a-whole on a year-over-year basis. Compared to May 2019, starts were up 6 percent in the Midwest but were down 17 percent in the South, 33 percent in the West and 47 percent in the Northeast. The South had 53 percent of the starts for the country as-a-whole.
The following chart shows the starts by region for the last 25 months.
Completions remain soft
The May report shows that completions in buildings with 5 or more units per building fell 2 percent to a figure of 310,000 units on a seasonally adjusted, annualized basis. However, the April figure for completions was adjusted upward by 14,000 units to 317,000 units. Without the adjustment to the earlier month, this report would have shown a rise in completions of 2 percent rather than the fall reported. Compared to May 2019, completions in buildings with 5 or more units per building were down by 25 percent.
For the country as-a-whole, completions for multifamily housing (two or more units per building) were actually up 4 percent month-over-month, comparing three-month moving averages. This is due to the unusually weak level of completions reported in February working its way out of the three-month moving averages. By region, the three-month moving averages of completions were up 26 percent in the Midwest and up 5 percent in the South. Multifamily housing unit completions were down 3 percent in the West and 16 percent in the Northeast.
On a year-over-year basis, the three-month moving average of completions in building with 2 or more units per building was down 10 percent nationally. Completions fell by 51 percent in the Northeast, 14 percent in the West and 2 percent in the Midwest but rose 4 percent in the South.
Completions by region for the past 25 months are shown in the chart below.
All data quoted are based on seasonally adjusted results and are subject to revision.