Auction.com: Multifamily Starts Slowing

IRVINE, CA-The single-family housing sector is showing signs of improvement, while the multifamily sector seems to be slowing, according to Auction.com Research. The firm's senior principal and economist Peter Muoio, Ph.D., reports that the Census Bureau's August housing starts data shows that multifamily starts decreased from July, while single-family starts have remained steady since 2009.

Muoio says that total starts measured a seasonally adjusted annual rate of 891,000, just 0.9% above July's downwardly revised estimate. “Total housing starts had been growing, albeit slowly, during 2011 and 2012, but hit a snag earlier in 2013 as the national economic recovery slowed and interest rates rose.”

Multifamily starts measured at a seasonally adjusted annual rate of 263,000 in August, an 11.1% drop from July's figure of 296,000, but still 24% higher than a year ago, Muoio continues. “Multifamily starts had been choppily rising since bottoming in 2009 until early 2013, reaching a high of 382,000 in March. However, since then, multifamily starts have been heading south but are still at healthy levels, which alleviates concerns of oversupply in the already-simmering multifamily market.”

On the other hand, single-family starts have pretty much remained stagnant since the end of the recent recession, Muoio reports. Single-family housing starts measured a seasonally adjusted annual rate of 628,000 in august, an uptick from July and 17% higher than a year ago. Still, single-family starts have remained between 400,000 and 600,000 since 2009, with very little fluctuation. The stagnation in single-family starts is easily explained by the still-high amount of existing-home inventory throughout the country.”

In fact, existing homes are still available to nearly a 25% discount compared to new homes, which is keeping both institutional investors and owner-occupiers away from the new-home market, Muoio reports.

In addition, August construction data aligns with other recently released housing data that indicate a slowdown in the housing recovery. “We continue to iterate that in order for the housing market to recover in earnest, the broader economic recovery must pick up, eventually generating organic demand for housing,” says Muoio.

As GlobeSt.com reported earlier this month, a reduction in the amount of uncertainty among businesses and households has been a key factor in the nation's economic recovery, according to Muoio. He points out in the firm's Fall Quarterly Economic and Real Estate Update that many indicators to recovery are trending in a positive direction, and he maintains that the decrease in uncertainty is a significant factor.