The Commerce Department released the New Residential Construction data this morning and reported an incremental decline in starts but an increase in permits.  The number of new housing units permitted in August was 3.2% up from July, to an annualized level of 620,000.   New housing starts displayed a contradictory trend, falling 5% to an annualized pace of 601,000.

In both cases, multi-family housing, which typically includes most rental properties, contributed to the swings.  Even though multi-family has been increasing at a greater pace than single family, it is still at very low levels, and the nature of attached product makes movements in starts and permits very lumpy.

On the local level, there are some areas that are showing growth in the single family sector.  As of July, out of the top 100 MSAs as measured by year to date permits, Fort Collins, CO leads with a substantial 48% increase in single family permits, albeit on a somewhat small volume of 417 single family issuances.   Counter-intuitively, beleaguered Detroit is also ahead of the pace of last year with a 27% gain, followed by Kennewick, WA at 24%.  There were 13 other MSAs with gains in single family permit activity compared to 2010, while 84 of the top 100 MSAs are seeing a slower pace.

In terms of multifamily permit issuance, Austin, TX has seen a surge in permits for 5+ unit residential buildings, followed by Tulsa, OK and Cincinnati, OH.  Out of the Top 100 new construction markets, 63 saw increases in multifamily permit activity from a year ago, while 36 saw declines, and 1 was unchanged.  With underwriting guidelines remaining stringent on mortgages, hesitant consumers, and cautious former homeowners that got burned in the housing bust, we expect multifamily activity, specifically rentals, to remain strong for several years at least.

At a national level, the new data doesn’t help much with understanding where we are.  If you can conclude anything from today’s release, it’s that we are bobbing along the bottom as we have been most of the year.  The local data is more helpful as it helps to shed light on markets that are seeing increasing activity.  Further, since construction jobs are a big part of the labor malaise, these should be the areas where some job growth begins to emerge if the local activity continues on an upward trend.

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