April Completions were expected to be stronger than last April
The question was would that take away from Starts?
The article "April Retail Forecast: Slowing While Growing" projected that Starts, Units Under Construction and Completions should have grown month to month and April to April. The question was would the construction workers required for completions borrow from the workers needed for starts. Starts have been slowing since last May. Completions have been picking up the past since February. What was recorded and what was reported in the April New Construction Report?
New Home Starts came in at 81,200 single family units and 114,100 total units. The expectation was for 88,000 to 94,000 single family units. The low side was 72,000 to 76,000 based on month to month growth. This would have placed us below April 2015, 2016, 2017, and 2018. This did not seem feasible. Normally when the month to month comes in low on projections then the actual data comes in lower than the annual growth would project. Annual growth was projecting 88,000 to 105,000 units. The forecast article commented that last year was the year of the Starts and that this year could be the year of Completions.
Units Under Construction have stopped growing to the sky. This is a good thing. The new construction market bottomed during 2011. We were at historically low levels of units under construction "all" year long. Units under construction had been growing at 10% a year for an protracted period of time. The concern was that we were approaching pre-housing recession levels of units under construction. It was thought that while units under construction would grow month to month that it would not spike as it has during prior years. The 1.1176 million units was just under the 1.1200 million expected. It could have been as high as 1.1600 million units. This may be because a portion are custom homes or because they need finishers. We have rarely been above this level during the month of April. That is good.
Completions came in at just over 100,000 units. Last year we were at 94,700. Completions are "returning to normal levels." This was a slight drop, non-seasonally adjusted, from the March level. This was not entirely unexpected. Double negative aside, the month to month growth was projecting 95,000 to 102,000 units month to month and between 107,000 and 113,00 units based on April to April growth. The "no overlap" projection indicated, as will the starts, that we could have anticipated the "high side of the low side" of expectations.
Slow and steady wins the race. New home construction is a marathon. Builders battle the elements and the overall economy. The current year data for starts is behind where we were last April. The rolling year starts is behind where we were last April. we had 280,000 starts last year and 263,000 starts this year. We had 1.237 million rolling starts last year and we have 1.221 million units this year. Completions are up year to data compared to where we were last April, 383,000 units versus 362,000 units. Rolling year completions are up from 1.186 million to 1.206 million units. It appears that builders are avoiding being overbuilt and over-staffed. We have roughly 400,000 fewer construction workers this April than we had during April of 2007.
We have room to grow for construction workers and that we could expect more completions during the next few months than we recorded during the same months last year. If completions continue to show strength then Inventory will rise. If inventory rises then there is the possibility for new home sales to rise. If new home sales rise then we should see jobs related to the real estate industry increase and we should see retail sales related to real estate improve compared to where we have been. The completions data bodes well for other data.
It's the economy.
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