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Housing Starts and Permits Remain Strong in March, Completions Severely Lag

A look ahead and back shows a bust has likely started but that may not be apparent until the April and May data.
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Housing data from census department, chart by Mish

Housing data from census department, chart by Mish

The Census Department's New Residential Construction report shows little sign of a housing pullback yet. 

Building Permits 

  • Privately‐owned housing units authorized by building permits in March were at a seasonally adjusted annual rate of 1,873,000. This is 0.4 percent above the revised February rate of 1,865,000 and is 6.7 percent above the March 2021 rate of 1,755,000. 
  • Single‐family authorizations in March were at a rate of 1,147,000; this is 4.8 percent below the revised February figure of 1,205,000. 
  • Authorizations of units in buildings with five units or more were at a rate of 672,000 in March. 

Housing Starts 

  • Privately‐owned housing starts in March were at a seasonally adjusted annual rate of 1,793,000. This is 0.3 percent above the revised February estimate of 1,788,000 and is 3.9 percent above the March 2021 rate of 1,725,000. 
  • Single‐family housing starts in March were at a rate of 1,200,000; this is 1.7 percent below the revised February figure of 1,221,000. The March rate for units in buildings with five units or more was 574,000. 

Housing Completions 

  • Privately‐owned housing completions in March were at a seasonally adjusted annual rate of 1,303,000. This is 4.5 percent below the revised February estimate of 1,365,000 and is 13.0 percent below the March 2021 rate of 1,497,000. 
  • Single‐family housing completions in March were at a rate of 1,000,000; this is 6.4 percent below the revised February rate of 1,068,000. 
  • The March rate for units in buildings with five units or more was 292,000. 

Housing Starts Single Family vs Multi-Family

Housing data from census department, chart by Mish

Housing data from census department, chart by Mish

Housing Starts, Permits, Completions Since 2000

Housing data from census department, chart by Mish

Housing data from census department, chart by Mish

Completions Severely Lag

What gets started gets completed, eventually. But eventually is taking longer and longer. 

This is due to shortage of labor, shortage of materials, and purposeful delays hoping that prices of lumber and materials comes down. 

Starts Represent Sales in What Month?

I asked housing expert, Bill McBride (aka Calculated Risk), a pair of questions:

The starts in March generally reflect sales in what month? How much of a lag is there?

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Calculated Risk Reply

Hi Mish, that is hard to say. Many starts were for multi-family (usually apartments).

Some starts are built for owner (not for sale). For single family, it usually takes about 6 months from start to completion, but it is taking longer now due to supply constraints.

Builders like to start once they have an order (limit spec building), but many builders right now are delaying sales until framing so they know their costs.

It is complicated! 

Best

Bill

Complicated it it. I expect a cleaner picture of the mortgage rate impact from existing home sales, albeit with a lag. 

Looking Ahead (and Back)

New home sales are recorded at contract signing and starts may be delayed. Existing home sales are recorded at closing but those will reflect sales from a month prior.

Rising mortgage rates will soon take a big bite out of both new and existing home sales, but starts and especially completions lag. 

A major slowdown is coming, and likely has started already. The big impact should be noticeable in existing home sales for April and May reflecting sale and mortgage commitments made in March and April.

This post originated at MishTalk.Com.

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