For all the hand-wringing about weak homebuilding markets in the U.S. and Canada, the statistics are not all that bad. In the U.S., the monthly average of seasonally adjusted and annualized housing starts through 2024’s first half was 1.378 million units, a drop of only -3.0% compared with the 1.420-million-unit average from January through June 2023.
In Canada, this year’s monthly average to date of 247,200 units is an increase of +5.8% versus the 233,700 units on average in H1 2023.
In a historical context, how do housing starts this year fare when set against their record in 2019, the last ‘normal’ year before the coronavirus turned the tables on just about everything? In the U.S., they are +12.3%, and in Canada, +20.7%.
In the U.S., a steady rise in interest rates did send national monthly housing starts lower for a year from April 2022 through April 2023. Since then, they have maintained a steady pace, rarely deviating from a range that has run from 1.3 million to 1.4 million units. In Canada, the negative rising interest rate effect had a shorter duration, suppressing starts only in the final quarter of 2022 and first half of 2023.
The standout issue in today’s residential real estate markets, U.S. and Canada, is how high home prices are thwarting the first-time buying aspirations of many young people. The central bank interest rate hikes have been an effort to cool demand and keep prices in check. Additionally in Canada, tougher mortgage approval stress tests and restrictions on purchases by foreign buyers have been measures adopted to rein in both unrealistic expectations and speculative fever.
But it’s also clear that on the supply side not enough new homes are being built. There are direct tie-ins to population change. In the U.S., it’s shifts that are playing the starring role (i.e., from the rest of the country to southern climes), and in Canada, excessive nationwide growth (i.e., a year-over-year increase in the total resident count above +3.0%, far exceeding America’s +0.4%).
What’s Happening in Specific U.S. Urban Markets
Looking at the 36 biggest (by population) cities in the U.S., and as set out in Graph 1 below (scroll to end), 15 of them recorded percent-change increases in the first half of this year versus January-June 2023; 19 registered declines; and 2 (Boston and Atlanta) stayed pretty much the same.
There were 4 cities with increases of one-third or more: San Diego (+53.7%); Kansas City (+46.8%); New York (+40.0%); and Columbus, Ohio (+35.0%).
At the opposite end of the spectrum, there were five cities with declines of approximately one-third: Riverside (-30.0%); Baltimore (-30.8%); San Antonio (-31.1%); Portland, Oregon (-32.1%); and San Francisco (-33.9%).
The level of those starts, plus their composition (i.e., singles versus multiples), though, may be more interesting. Graph 2 highlights that five cities stand head and shoulders above the others for number of starts: Dallas-Ft Worth (37,298 units); Houston (33,103); New York (30,697); Phoenix (24,290); and Atlanta (21,164).
The dominance of Texas is illustrated by the fact that Austin is in sixth spot, giving the state fifty percent of the top half-dozen positions on the leader board. As a share of the total starts by all 36 cities, Dallas-Ft Worth and Houston combined accounted for about one-fifth (19.0%), and those two cities plus Austin and San Antonio contributed one-quarter (25.1%).
Texas and Florida are among the U.S. states with the fastest population growth rates. The strong correlation between population growth and housing starts in Texas is eminently clear. The same is also true, but with the need for a little more explanation, in Florida. Three cities in Florida were among the top 13 for level of starts in first half 2024: Tampa (13,255 units); Orlando (12,446 units); and Miami-Ft Lauderdale (9,962).
Jacksonville, which doesn’t make it into the 36 most populous cities club, had housing starts in H1 2024 (7,991 units) that were higher than about half of the cities shown in Graph 2.
Also, there is more geographic diversity to housing starts in Florida, with strong levels in coastal communities: the Sarasota area (7,752 units); Cape Coral-Fort Myers (7,655); and Lakeland-Winter Haven (5,575).
There were only nine cities out of the 36 in Graphs 1 and 2 where the number of multiple units begun in H1 2024 was greater than the number of singles. Heading the list of cities with multiples as a greater share of total was New York (79.2%). Next in line were Miami-Ft Lauderdale (72.0%); Boston (69.5%); San Diego (66.2%); Seattle (61.9%); Columbus (59.1%); San Jose (57.1%); Los Angeles (54.2%); and Kansas City (53.7%).
In Dallas-Ft Worth, multiples were just 32.8% of total units started in H1 2024, and in Houston, they were a meager 15.9% of total.
There’s an argument that multiple-unit construction is a more efficient and environmentally friendly way to provide living accommodations. This seems especially true if it is located at a rapid transit hub, where great numbers of potentially polluting commuters can be dissuaded from clogging arterial roadways to and from the suburbs.
The Multiples vs Singles Experience in Canada
The multiples versus singles experience in Canada is quite different than in the U.S. In Canada’s six largest cities (by population), multiple-unit starts as a share of total are consistently near the top of the 0%-to-100% range.
In H1 2024, multiples as a share of total were 94.5% in Montreal; 92.6% in Vancouver; 92.1% in Toronto; 82.0% in Ottawa-Gatineau; 70.1% in Calgary; and 65.0% in Edmonton.
Particularly noteworthy in Canada has been the re-ordering of the most dynamic urban homebuilding markets. In H1 2024, Toronto (22,529 units) stayed the leader by a wide margin, with Vancouver (14,278) continuing to hold onto second spot. But the jockeying for third has seen Montreal (9,373 units) supplanted by Calgary (11,178 units). Nor is it inconceivable that Edmonton (8,448 units), currently in fifth place, might move up a notch.
Also, in Canada, at the provincial level, and in terms of year-over-year percent changes in starts, there has been a remarkable development through the first half of 2024. For the first time going back at least a century, the four frontrunners are all in the Atlantic Region.
Excessively high home prices elsewhere are causing population shifts that have driven home starts in Newfoundland/Labrador to be +116%; Prince Edward Island, +79%; Nova Scotia, +64%; and New Brunswick, +54%.
Check out the latest month's construction starts in our Construction Economy Snapshot, along with trend graphs, regional starts data, and more.
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