The Census Bureau released its monthly new residential construction report for September 2020. It shows weakness for permits and starts but a surge in completions of multifamily housing units.
Permits rebound mildly
The number of permits issued for buildings with 5 or more units rose slightly in September to 390,000 units on a seasonally adjusted, annualized basis. This was up 1 percent from the August figure, which was revised upward by 5,000 units. September permits were down 22 percent from the year-earlier level and were 13 percent below the average level for the prior 12 months.
In addition, 44,000 permits were issued in September for buildings with 2 to 4 units. This was down 15 percent from the unusually high level of the previous month but was 22 percent higher than the unusually low level recorded for September 2019.
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 September was up 1 percent from the August level but was down 15 percent from the level of September 2019. This is shown in the first chart, below. The three-month moving average came it at 459,000 units, 8 percent below the trailing 12 month average.
On a month over month basis, permit issuance was down slightly in the Midwest and South but up 6 percent in the Northeast and 4 percent in the West.
Compared to year-earlier levels, the three-month moving average of permits issued was up 6 percent in the Midwest, but was down 15 percent in the West, 17 percent in the Northeast and 20 percent in the South.
The following chart shows the three-month moving averages of permits by region for the last 25 months.
Multifamily housing construction starts drop
The latest report of starts in buildings with 5 or more units saw the July figure revised downward by 18,000 units and the August figure revised downward by 29,000 units on a seasonally adjusted, annualized basis. The preliminary September figure came in at a relatively weak level of 295,000 units, down by 15 percent from the revised August figure. This was also 17 percent below the level of starts in September 2019.
Multifamily housing construction starts (two or more units per building) in September were down 5 percent from their August levels for the country as-a-whole, based on three-month moving averages. Starts were up 27 percent in the Northeast, a region that has seen a very low level of starts since April. However, September starts fell 1.5 percent in the West, 9 percent in the South and 18 percent in the Midwest from their levels in August.
The three-month moving average of starts was nearly unchanged for the country-as-a-whole on a year-over-year basis. Compared to September 2019, starts were up 27 percent in the Midwest but down 1 percent in the South, 2 percent in the West and 18 percent in the Northeast.
The following chart shows the starts by region for the last 25 months.
A September blowout for multifamily housing completions
The September report shows that completions in buildings with 5 or more units per building surged 52 percent to a figure of 480,000 units on a seasonally adjusted, annualized basis. In addition, the figures for July and August revised upward by 11,000 and 3,000 units respectively. Compared to September 2019, completions in buildings with 5 or more units per building were up 79 percent. However, it should be noted that the September 2019 completions figure was exceptionally low. Compared to the trailing 12 month average level, completions were up 44 percent, still a remarkably strong performance.
For the country as-a-whole, completions for multifamily housing (two or more units per building) were up 17 percent month-over-month, comparing three-month moving averages. By region, the three-month moving averages of completions were up 44 percent in the Northeast, 19 percent in the Midwest, 18 percent in the South and 7 percent in the West.
On a year-over-year basis, the three-month moving average of completions in building with 2 or more units per building was up 28 percent nationally. Completions were up by 62 percent in the South, 16 percent in the West and 9 percent in the Midwest. Completions fell by 12 percent in Northeast.
All data quoted are based on seasonally adjusted results and are subject to revision.