Outlook for Housing Starts Remains Bright

• Despite monthly volatility, housing starts continues to be a bright spot in an otherwise supply constrained market.
• Though U.S. economic expansion is maturing, the potential for growth in housing starts remains solid as starts hover around 80% of the 50-year average.
• Single family builders are slowly, but surely, gaining ground on what has been a strong four years for multifamily construction.

New housing starts grew solidly in May. The 12-month rolling total of starts-which is a less volatile measure-grew 11.8% year-over-year in April to 1,154,800 starts, slightly up from April. This represents the most starts in a 12-month period since August 2007. Housing starts continue to be a bright spot in an otherwise supply constrained market, and the 12-month rolling total inches up to 80% of the 50-year average of 1,443,060 starts.

Starts of single-family units have also shown strong growth over the past year, increasing 12.9% from a 12-month rolling total of 668,200 in May 2015 to 754,500 in May 2016. The share of multifamily starts in 5+ unit buildings continues to drop from a 42-year high last year, although they grew 11.4% year-over-year. We expect the relative rise in single-family starts to continue to into the remainder of the year as single-family builders play catch-up and rent increases soften in many major markets.

By Ralph McLaughlin | June 17, 2016