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The 7 Things You Should Know About New Construction

by Peter Thomas Ricci

Housing starts may have been down last month, but there are many more details about new construction that are of equal import.

The Census Bureau released its latest report on new construction, and it wasn’t pretty – housing starts were down 9.3 percent from May to June, with single-family housing starts dropping 7.5 percent.

Of course, there is much more to construction than a single month’s housing starts data, so below, we’ve collected the most important tidbits of information right now concerning where the new construction markets are.

1. Thunk! – That’s the noise that the latest new construction numbers have generated; not only were overall housing starts at their lowest level (893,000) in nine months, but single-family starts were down to their lowest level (575,000) since Nov. 2012.

2. Long-Game Positivity – However, as bad as those numbers seem, the long-term portrait is much more positive for home construction, which can be quite volatile month to month. Over the entire second quarter, for instance, housing starts are up 13 percent year-over-year, with single-family starts up 4 percent and multifamily starts up a whopping 37 percent.

3. Multifamily Party in the Midwest – Much of that multifamily activity is taking place in the Midwest and Northeast, where multifamily construction is up more than 50 percent year-over-year; meanwhile, multifamily is pretty much flat in other regions.

4. In the Pipeline – Although starts were down in June, the number of homes currently under construction is at its highest level since 2009.

5. Inventory Relief? – Similarly, though housing completions were down from May to June, they are up 15 percent year-to-date in 2014, with single family up 10 percent and multifamily up 34 percent; suffice to say, such numbers suggest great things for housing inventory.

6. Peaks and Troughs – A quarter-by-quarter analysis of single-family housing starts is very educational for where home construction is at right now. Year-over-year, single-family starts rose 15 percent in 2013’s second quarter, but in the third and fourth quarter, they rose 10 and 11 percent, respectively, before falling 2 percent in 2014’s first quarter; with starts up 4 percent now in 2014’s second quarter, perhaps starts are back on the rise? After all, for the first time since Jan. 2014, single-family permits are in positive territory.

7. What’s the World Got in Store? – But ultimately, there are still more questions than answers regarding the state of new construction, and yesterday’s report on builder confidence certainly didn’t help matters. After all, how could builder confidence bounce back to positive territory while housing starts are falling nearly 10 percent? Perhaps the jump in confidence is foreshadowing a strong July and August for starts? We’ll just have to wait and see.

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