Multifamily Permits and Starts Continue to Slow

What’s in the pipeline of multifamily housing/? RealPage Market Analytics reported that the seasonally adjusted annual rates for multifamily permitting and starts each declined month-over-month and year-over-year as of June of this year. According to the U.S. Census Bureau, the June permitting rate slowed 13.5%, from May to 467,000 units, which was a significant 33.1% drop from a year ago June.

This continues a trend since starts were lower than initially reported in May, revised down from 624,000 to 545,000 units, a minus of 14.5%. June’s numbers of 482,000 dropped 11.6% below May’s revised rate and 11.3% from a year ago in June.

Another sign that starts are overestimated, the report said, is an absence of a typical gap between permits and starts in recent months. Historically, there usually are about 56,000 more units permitted than started when comparing rates monthly. And one concern is that permits could slow faster than starts. All sorts of reasons account for why permits, which authorize construction to start, don’t become starts, when the excavation actually begins,  according to NAHB..

Comparing single-family results to multifamily is also useful to see how construction fares in other parts of the housing industry. In June, single-family starts were at 935,000 units, which was down 7% from May and down 7.4% from a year ago. Combined total residential starts fell 8% for the month and year to 1.434 million units. Permitting on an annual rate hit 922,000 units in June, up slightly 2.2% from May. However, total residential permitting dipped 3.7% in May to 1.44 million units but were down 15.3% for the year.

Completions are also helpful to know, these, too, dipped 2.5% from May to 476,000 units but went up 26.3% from a year ago June’s completion rate. Single-family completions were down slightly to 2.8% in June with the annual rate reaching 986,000 units, down 2.3% for the year.

The number of multifamily units authorized but not started decreased a bigger 5.6% for the month to 136,000 units, down 2.9% from a year ago. And the actual multifamily units under construction was 977,000 units, almost the same as last month’s numbers, and exceeding the single-family units of 688,000.

Where numbers went down the most. The biggest decrease for multifamily permitting was in the Northeast where it was down 55.4% to 36,000 units. The West saw a slowdown of 37.1% to 127,000 units while the South’s drop was 33.4% to 229,000 units. The Midwest proved the exception and experienced a slight increase of 5.7% to 74,000 units in June. When compared to the prior month, permitting was also up in the Midwest and down in the other three areas. 

When it came to starts, they were up for multifamily housing only in the South with a modest increase of 5.9% to 266,000 units. Starts dropped by 49% in the Northeast, 25.8% in the Midwest and 14.5% in the West.

Top cities for permitting. When it comes to looking at city numbers and not just regions, New York City led the nation in multifamily permitting, down from a year ago and also less than in May.  A total of 26,637 units were permitted there through June but were down by more than 14,000 units from last year and more than 4,000 less than in May. Houston came in second with more units than last year but fewer than last month. No. 3 on the list was Dallas, which had fewer units permitted than in May but more than a year ago.

Altogether, the annual total of multifamily permits used in the top 10 metros numbered 191,871 or 4% more than the 185,265 issued in the prior 12 months but down about 5% from last month.