The value of residential construction starts fell 9% from March to April. This is part of larger construction start slow down, as all three major sectors (non-building, non-residential and residential) took a 13% collective tumble to $674.3 billion, according to a report by Dodge Data & Analytics.
In a statement regarding the report, Dodge Data & Analytics Chief Economist Robert Murray said month-to-month construction data is volatile and that it is best to average March and April to get a feel for the health of the industry.
"The average for March and April shows that construction starts so far in 2018 are proceeding slightly behind last year's average pace,” Murray said. “Even with this modest slowdown in early 2018, there are several factors in the current environment that should help construction activity to stay close to recent levels.”
Murray points to strong job growth, slight easing of the lending standards from the Federal Reserve, new funding for several public works programs, and tolerable interest rates as the reason for measured optimism in the construction industry.
Residential construction starts, both single-family and multifamily, totaled 303.8 billion, a 9% decrease from March. Multifamily dropped by 20%, which signaled the second declining month in a row. April’s volume of multifamily housing was down 7% from the average monthly pace in 2017.
On the whole, residential building grew 3%, but this is all due to single-family housing, which rose 7% year-over-year, whereas multifamily housing starts fell by 7% YoY.
Dodge’s data reflects what other researchers have been predicting, namely a slowdown in multifamily construction to maintain razor thin vacancy rates.
Investors favor multifamily, but not new units. The lion’s share of multifamily investors appear to be buying value-add or slightly distressed urban core product to hold and improve. Keeping vacancies low with a constrained pipeline is in the investors’ best interest as Baby Boomers and Millennials clamber over one another for what little product is still available and/or affordable.