Single-family construction still dominates, but its share of residential construction has dropped to its lowest in decades.
By wolf richter For wolf street,
The construction of single-family homes and multi-family buildings is going from a big boom to an overall downturn, divided into two parts:
- An Apparent Recession Begins in the Single-Family
- Multifamily flattening begins at highest level since 1986.
Total residential construction starts in April (black line) rose to 127,100 housing units, not seasonally adjusted, the fourth month in a row of gains that are typical of the season. But year-to-date, they were down 22.6% because of a “base effect”: housing starts normally peak in the summer, but last year they rose to April (“base” levels for this calculation). Not seen since June 2006.
The 12-month moving average (red) shows the long-term trend and the downturn that began after the sharp rally in April last year: down 13.3% year-on-year, but up 17.5% since April 2019.
Construction of single family homes begins April increased for the third month in a row, as would be expected for this season by 78,800 homes, but it was down 28.2% from April last year – partly due to a base effect.
Compared to April 2019, single-family starts were down by 3.4% (Blacks). The 12-month average in April shows the decline that began after the rally in April last year (red):
Construction of multi-dimensional projects startedCondos and apartment buildings, such as those with five or more units, also jumped in April, as would be expected for this season, down 11.8% from April last year (53,500), the most since 1986. ,
Compared to April 2019, multifamily starts were up 42.6% (black line). The 12-month average reflects the recent flattening-out of the boom at the highest level since the mid-1980s.
Multifamily projects tend to be larger and can have longer lead times. Projects whose construction began in April were often in the planning stages years ago.
In many densely populated urban cores, multifamily is just one type of housing that is being built, and for many years, much of it has been high end with amenities, because that’s where the money is.
In these urban areas, the bulk of single-family construction occurs further away from the urban core. The decision of whether to live in a new multifamily building in an urban core or a new home comes down to a lifestyle choice – and both are expensive.
Single-family construction still dominates, but its share is declining. In the 12 months through April, the share of single-family housing fell to 62% of total housing, the lowest share since 1986!
The share of multifamily starts (buildings of 5 or more units) increased to 37%, the highest share since 1974!
The share of multifamily starts in smaller buildings of 2-4 units has dropped to a historic low of about 1%.
Over the long term, huge waves of housing booms and busts come and go. This chart also shows that Housing Bubble 1 — starting with the single-family peak in 2005 — was such an epic creature. And it shows that the current multifamily boom is still subdued compared to the mid-1970s (opening of single-family homes = red line; multifamily units = green).
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