Today’s housing data are driving some optimistic headlines about the 1.6% increase in housing starts in March and the upward revisions to February data. Looking a bit deeper, however, one finds that single-family starts actually fell in March; all of the gain came in multi-family units.
As I’ve noted in previous posts (here, for example), I think it’s useful to look not only at the number of housing starts, but also at the number of houses under construction (which reflects the pace of both starts and completions). Why? Because that gives us a sense of how much construction activity is actually taking place:
As you would expect, the chart shows that the number of single-family homes under construction fell off a cliff in early 2006. Almost 1 million new single family homes were under construction in February 2006. Today there are just 305,000.
The precipitous decline ended last summer, and housing construction has now been flat for several months.