Total housing starts were reported at a seasonally adjusted (SA), annual rate of 1,215,000 for the month of June. On a three month moving average (3MMA), basis SA total starts came-in at 1,164,000, a 0.4% year on year (y/y), growth rate. Single family housing starts jumped by 9.1%, 3MMA y/y, while multi-family tumbled, -16.0%, 3MMA y/y.

housing-starts-fig1Figure 1 shows SA housing starts history from 2011 to present. The South dominates with 550,000, 3MMA annualized starts, 47.2% of the last 3 months total. The West was the next strongest with 313,000 starts, a 26.9% share of starts. The Midwest started 191,000 housing units, 16.4% of the total, while the Northeast had 110,000 starts representing with 9.4% of the total 3MMA annualized starts.

Table 1 housing-starts-table1breaks down starts and permit detail for single family (SF) and multi-family (MF) by region. All data references are three month moving averages y/y, (3MMA y/y), which helps smooth out spikes in single month data and therefore gives a more realistic viewpoint on the pulse of home building activity. Year on year, (y/y) total starts in June were a mixed bag, up in the West (16.2%) and Northeast, (5.1%), but down in the South (-6.9%) and Midwest, (-1.9%). Single Family starts were higher y/y in the West (23.5%), South (5.6%) and Midwest (12.8%) y/y, but declined in the Northeast (-12.1%). Year on year MF starts plummeted in the Midwest (- 24.1%) and South (-36.6%). MF starts surged in the Northeast by 29.0% y/y and were up 5.2% in the West.

Nationally, total SA annualized permits increased 6.8% 3MMA y/y to 1,217,000 units with SF permits up 7.9% and MF permits up 4.7%. All regions reported stronger growth in total building permits y/y. The Northeast reported a 13.0% y/y rise in permits, a combination of a slight -1.2% decline for SF and a large 29.6% y/y gain for MF. The Midwest total permits were up 5.1% y/y (SF +4.5%, MF 6.3%), while the South posted overall permit growth of 5.3%, (SF +9.5%, MF -4.8%). The West saw its residential permits increase by 8.4%, (SF +9.3% y/y, MF 7.2%).

Figure 2 housing-starts-fig2shows permit history for both SF and MF from 2012 to present. The slope of the SF line shows relatively consistent growth over the time horizon presented as depicted by the trend-line. The multi-family line albeit more volatile than SF had a similar growth trajectory as SF through the mid-2015. Since then the rate of growth has averaged 444,000 annualized rate. Thus far in 2017, the average MF permit rate has fallen to 430,000.

Permits gage future housing builds. The column on the far right in Table1 illustrates permits minus starts. For the nation as a whole permits minus starts = +53,000, with SF negative 29,000 but with MF offsetting this with positive 82,000 units. This means that overall housing construction should rise in the coming months. The marketplace for housing has shown a dramatic shift towards apartments since the recession ended. Between 2002 and 2007 the ratio was 4.82 to 1. From 2011 to present this ratio fell to 2.19. The ratio of SF to MF in June was 2.51 to 1.

At Gerdau, we routinely monitor the US housing market because historically new home construction has preceded non-residential construction and therefore is an excellent barometer to foresee the likely future demand for construction steel products.