Housing Starts Are Increasing, But Inventory Remains Low

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Housing starts are increasing slowly but steadily as they try to make a dent in the low inventory that is constantly looming

March 24, 2016

Housing starts are taking a tortoise and the hare approach to combating low inventory, hopefully, with a similar outcome

One of the many lessons the professors over at Looney Tunes University taught us is that slow and steady wins the race. As a confident and wisecracking Bugs Bunny jumps out to a huge lead in a race against his tortoise counterpart, he becomes a bit too presumptuous that the race is already over and decides a nap is in order. It isn’t hard to figure out what happens next, as the tortoise takes the lead and ultimately wins the race.

And when it comes to the race to increase new home inventory, slow and steady seems to be the way the industry is trending. The good news is that housing starts are continuing their upward climb as the 12-month rolling total of starts grew 11.9 percent year-over-year in February to 1,131,400 starts, according to Trulia. Not since June 2008 has the number of housing starts in a 12-month period been this high.

Now for the bad news, as this whole slow and steady wins the race mentality comes with a few pitfalls. The 12-month rolling total is still 21 percent below the 50-year average of 1,444,619 starts.

Additionally, buildings with 5+ units saw a 12.4 percent growth in housing starts to 386,000 in January 2016. The total number of multifamily starts in 5+ unit buildings is holding steady around a 42-year high.

From a regional standpoint, the South is leading the country with 567,700 new starts, which is the best 12-month span for the area since June 2008. The Midwest saw a 12-month rolling total of 156,100 units and the Northeast, which leads the country in year-over-year growth, saw a 33.8 percent increase to a total of 142,100 new starts. The West had a solid 12-month total of 266,500.

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