The numbers released today by the Department of Commerce show that single-family housing starts fell in January by 6.7% (plus or minus 10.6%) compared with the previous month (seasonally-adjusted). Multifamily construction meanwhile continued to rise, up 12.1% on the month (plus or minus 25.4%). Comparing versus a year ago, single-family starts are up 16.3% (plus or minus 12.0%).
Despite this weakness, Metrostudy sees signs that builders are gearing up for more production in 2015, at least in certain markets. An excellent leading indicator for housing starts is the number of lots reaching development (ready for the builder to start building). Our in-field research shows that lot development has doubled in the last two to three years in many markets. In markets like Austin, SLC, Tampa, and others, lot development is running faster than starts. That strongly suggests increased housing starts in those areas.
Here are some key points to remember as we look into spring:
- Builders are JUST starting to extend their geographic reach, looking at land or lots in the somewhat more remote suburban regions that exploded during the boom and then collapsed during the late 2000s.
- The entry-level new home market is still soft, but the builders who are targeting that group successfully are coming up with ways to keep their prices under $200,000, and they are finding ready buyers.
- Mortgage availability is still an issue outside the luxury demographic and the ‘elite’ active-adult buyers.
- Job formations are better, but the jobs that are being created are not those typically associated with high rates of home buying. Still, the overall “lift” that we are expecting from greater economic activity and increased aggregate income will have a stimulative effect on new home demand throughout 2015.
See the release from the Census here.