Spring is the peak season for the building and construction sector, and the much anticipated data measuring springtime activity in the residential construction sector is finally starting to emerge. According to the Census Bureau, the total number of new houses started in the U.S. posted a strong gain of 9.2 percent in April when compared with the same month last year. For the year-to-date, the housing starts total is up 5.5 percent when compared with the first four months in 2014.
This solid gain in April mitigates the sharp drop in the data from February, and it puts the running total for this year right back on track to hit my forecast for this year. For 2015, I expect the rolling monthly average in this data get up to 95,000 units per month. This forecast results in an annual starts total of 1.15 million units when the books are closed on this year, or a gain of 14 percent when compared with the total from 2014.
A gain of 14 percent may seem like a pretty big jump, but as the chart indicates, it represents just a moderate acceleration in the steady, but gradual recovery that has prevailed since 2012. Or another way to look at this is that the monthly housing starts data are still coming in at a pace that is down almost 50 percent from the peak in 2005, and they are 25 percent below their pre-boom, long-term historical average.
On a regional basis the April data represents something of a market correction, or what economists call a regression to the mean.
The Northeast total for April spiked upward by 50 percent when compared with the previous year, but this jump was due in large part to the start of projects that were postponed by severe weather. For the year-to-date, the Northeast starts total is flat when compared with last year.
The Midwest total through the first four months of 2015 is also flat when compared with 2014. The South is experiencing decent growth of 5 percent through April, and the West is enjoying a 12 percent gain this year.
All of these regional trends this year are consistent with the long-term patterns over the past few years — the majority of the growth occurring in the South and West, while the totals are flat-to-down in the Northeast and the Midwest.
The one trend in the April data that portends a brighter future is the jump in the number of single-family housing starts. Growth in the single-family segment has lagged the robust gains in the multi-family segment ever since the bubble burst in 2008.