Multifamily housing construction recovering

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multifamily housing construction

The Census Bureau released its monthly new residential construction report for June 2020. It shows signs of life in multifamily housing construction.

Permits decline

The number of permits issued for buildings with 5 or more units fell in June to 368,000 units on a seasonally adjusted, annualized basis. This was down 14 percent from the May figure, which was itself adjusted downward. June permits were down only 4 percent from the number of permits issued in June 2019 but were down by 18 percent from the average of prior 12 months. It is not clear to what extent the decline in the number of permits is being driven by reduced interest on the part of housing developers or by the permit approval process being impacted by COVID-19 related closures.

In addition, 39,000 permits were issued in June for buildings with 2 to 4 units. This was down 4 percent from the previous month but was only slightly off the recent pace 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 June was down 4 percent from the May level and was down 9 percent from the level of June 2019. This is shown in the first chart, below. The three-month moving average came it at 426,000 units, 14 percent below the trailing 12 month average.

On a month over month basis, permit issuance was up 6 percent in the Northeast, unchanged in the Midwest, down 4 percent in the South and down 14 percent in the West.

Compared to year-earlier levels, the three-month moving average of permits issued was nearly unchanged in the South. The three-month moving averages of permits fell by 17 percent in the Northeast, 7 percent in the Midwest and 21 percent in the West compared to their levels in June 2019.

The following chart shows the three-month moving averages of permits by region for the last 25 months.

multifamily housing construction permits

Multifamily housing construction starts recovering

The June report saw starts for both April and May revised upward from the levels reported last month. In addition, the preliminary report for June finds starts in buildings with 5 or more units per building rising 19 percent from the revised May figure to a level of 350,000 units on a seasonally adjusted, annualized basis. This figure is down only 3 percent from the figure for June 2019.

Multifamily housing construction starts (two or more units per building) in May were down 4 percent from their May levels for the country as-a-whole, based on three-month moving averages. Starts were down 16 percent in the South but rose by 10 to 11 percent in the other regions of the country.

The three-month moving average of starts was down 26 percent for the country-as-a-whole on a year-over-year basis. Compared to June 2019, starts were down 55 percent in the Northeast, 27 percent in the South, 16 percent in the West and 9 percent in the Midwest. The South had 47 percent of the starts for the country as-a-whole.

The following chart shows the starts by region for the last 25 months.

multifamily housing construction starts

Completions fall, sort of

The June report shows that completions in buildings with 5 or more units per building fell 6 percent to a figure of 311,000 units on a seasonally adjusted, annualized basis. However, This is only because the May figure for completions was adjusted upward from 310,000 units to 329,000 units. This is the second month in a row where completions were reported as falling only because the completions figure for the prior month was adjusted upward. Compared to a relatively weak June 2019, completions in buildings with 5 or more units per building were up by 11 percent.

For the country as-a-whole, completions for multifamily housing (two or more units per building) were down 6 percent month-over-month, comparing three-month moving averages. By region, the three-month moving averages of completions were down 15 percent in the Northeast but down only 4 to 6 percent in the other regions of the country.

On a year-over-year basis, the three-month moving average of completions in building with 2 or more units per building was down 5 percent nationally. Completions fell by 38 percent in the Northeast, 23 percent in the West but rose 7 percent in the Midwest and 18 percent in the South.

Completions by region for the past 25 months are shown in the chart below.

multifamily housing construction completions

All data quoted are based on seasonally adjusted results and are subject to revision.