Starts and permits fell in July, according to data by the U.S. Census Bureau and U.S. Department of Housing and Urban Development, as single-family homes continued to drag along the bottom and multifamily continued to zigzag upward.
Permits, the more accurate and forward-looking between the two indicators, slipped 3.2% for the month, to an annual rate of 597,000. The drop came from multifamily, which reported a 10.2% decline while single-family rose 0.5%. However, those numbers are both better and worse than they appear. Multifamily’s steep drop is attributed to the nature of multifamily building, where many units are permitted and begun at once, lending to larger swings. Despite the decline, July’s multifamily permit reading is still the third highest in the last 30 months.
"Indeed, the stars are starting to align for the multifamily segment," said Patrick Newport, U.S. economist at IHS Global Insight, in a statement regarding the numbers. "Rents are rising, as are the prices of rental properties, rental vacancy rates are falling, job growth is up—although it has shifted into low gear—and homeownership rates are falling. Going forward, this category should continue [slowly] zigzagging its way back on track."
In the single-family sector, permits weren’t as promising. Despite the small gain, which brought numbers to an annual rate of 404,000, the reading was the 12th lowest on record. "This category is still stuck near the bottom, and the outlook for the rest of the year is for more of the same," says Newport.
Overall, housing starts declined 1.5% for the month, dropping to an annual rate of 604,000. The slow-down was fueled by the single-family sector, which was down 4.9%. Multifamily starts gained 7.8% for the month.
Starts gained in both the Northeast and South, showing improvements of 34.7% and 5.6%, respectively. The gains were largely due to multifamily in the Northeast, where single-family starts improved by 7.5%. And the South’s rise was due entirely to multifamily, as single-family starts dropped 4.2% in the region during July.
Starts declined for the month in the Midwest and West, dropping 37.7% and 3.0%, respectively. While the West’s drop was due to the swings of multifamily building (single-family improved by 4.6% in the region), the Midwest declined across the board, with a single-family drop of 22.6%. However, permit numbers have been inching up for the Midwest, Newport points out, adding that "it’s something to watch."
Claire Easley is a senior editor at Builder.