Multifamily Starts Reportedly Plunge in May

The seasonally adjusted annual rate (SAAR) for multifamily starts dropped an incredible 41.6% from April’s revised figure to 284,000 units in May, according to the latest data release from the U.S. Census Bureau and the Department of Housing and Urban Development. That annualized figure is also down 12.3% from last May.

As we’ve reported before, the SAAR for multifamily starts can swing wildly from month to month as it is based on a small sample of building permits tracked by the U.S. Census Bureau in its Survey of Construction (SOC). Census Bureau field representatives sample individual permits within a sample of permit offices and interview the builders or owners who took out the sampled permits to obtain start and completion dates. After seasonal adjustment, the annualized starts figure is reported with a statistical margin of error.

May’s SAAR for multifamily building permits was 474,000 units, down 3.5% from April’s rate but up 3% from last year. The sample for the SOC is less than 1,000 permitting places while the Building Permits Survey gathers data from almost 20,000 permitting places around the country. Although the building permit figure is also seasonally adjusted and can also vary significantly month to month, it carries no margin of error.

The not seasonally adjusted annual totals for both multifamily starts and permits (which many believe are more accurate) were down slightly or essentially unchanged in May from April at 419,400 units and 478,500 units, respectively. Both permits and starts were up roughly 10% to 20% from last year each.

Meanwhile, single-family construction continued to slow with the May SAAR for single-family starts down 1.9% from April and 6.7% from last May to 882,000 units. Single-family permitting ticked up 0.6% for the month but was down 1.8% for the year to 886,000 units, almost matching its 12-month average of 889,000 units.

Combined with the small plex category, total residential starts decreased 15.4% for the month and were down 8.7% for the year to 1.177 million units, while total residential permitting slipped 0.7% for the month and were essentially unchanged for the year (-0.2%) to 1.413 million units.

Multifamily completions were down 8.4% from last May and fell 19.3% for the month to 426,000 units. Meanwhile, single-family completions dropped 16.8% from last May to 872,000 units and were down 1.6% from April.

With decreasing starts, the SAAR for multifamily units under construction decreased 8.1% from last May to 662,000 units and were down 1.3% for the month. Single-family units under construction were down 5.9% for the year but virtually unchanged from April at 587,000 units.

Compared to one year ago, the annual rate for multifamily permitting increased in three of the four regions, led by the Northeast (up 19.9% to 68,000 units), the West (up 18.6% to 136,000 units) and the South region (up 2.5% to 216,000 units). The Midwest region saw a decrease of 30.3% in their annual multifamily permitting to 55,000 units in May. Compared to the previous month, permitting was up in the same three regions and also down in the Midwest (by almost half).

Annualized multifamily starts increased sharply in the small Northeast region (up 70.5% to 56,000 units) and were up 38.7% in the Midwest region to 58,000 units. The South region’s multifamily starts decreased 51.3% to 81,000 units, while the West region saw starts increase modestly (7.6%) to 88,000 units. Compared to April’s SAAR, starts were up slightly in the Midwest and down by 37% to 54% in the remaining regions – accounting for the big drop in starts nationally.