Chart of the Moment

Canadians prefer multiple units as more Americans seek single homes

Canadians prefer multiple units as more Americans seek single homes

This Economy at a Glance (EAAG) will look at home starts in major U.S. and Canadian cities, according to ‘totals’ (Part 1), plus single-family (Part 2) and multi-family (Part 3) markets.

Part 1

The accompanying tables rank the dozen American and half-dozen Canadian cities by actual start levels in 2015 and year-over-year percent changes.

For both the U.S. and Canada, the cities are the broad designations (MSAs and CMAs) which include downtown cores plus all suburbs with close live-work commuting ties.

The website versions of these three articles include a wealth of graphs, since it is often true that a picture is worth a thousand words.

Nevertheless, here’s commentary on total new home groundbreakings in the 18 major cities.

In the U.S., the monster-sized market for total housing starts in 2015, at 86,400 units, was New York.

Two cities in Texas, Houston (56,900) and Dallas-Fort Worth (56,400), were in second and third places respectively, but way back.

Los Angeles (33,700) and Atlanta (30,000) placed fourth and fifth.

New York’s single-family starts declined slightly (-5.2%), but there was a tremendous surge (+109.6%) in its multi-family initiations. As a result, total starts in the Big Apple climbed to their highest level this century. They were about 20,000 units above their previous most recent peak, which occurred in 2005.

No other top-dozen American city managed to exceed its prior high-water mark of the past 15 years, but Dallas-Fort Worth and Los Angeles almost climbed back to their former pinnacles.

Houston, which performed well in 2014, had to swallow a retreat (-10.6%) last year, as the low global price for oil brought a weaker local energy-patch economy.

San Francisco and Boston almost recovered to their previous highs, but didn’t quite make it all the way.

And there were several U.S. cities with 2015 total starts that remained far under what they had achieved before.

Chicago’s total starts level last year, at 15,700 units, was less than one-third of its 2005 record of 53,900 units.

Phoenix was another city with total starts (22,900 in 2015) stuck at about only one-third of their former glory (65,300 in 2004).

While Miami’s total starts were a splendid +46.2% year over year, they were still only about half of 2004’s 46,100 units.

Atlanta (30,000 units in 2015) was similarly far removed what it managed from 2000 through 2006 (70,000 on average).

The major Canadian cities haven’t displayed anything like the similar wild swings in total starts experienced by their American cousins.

Furthermore, it’s interesting to note that five of the Canadian half-dozen cities (in Table 1) had total starts in 2015 that would have placed them above many of their U.S. counterparts. Toronto, with 42,300 units, would have ranked fourth in a combined listing.

Part 2 will proceed to the single-family market, with Part 3 concentrating on multiple-units.

Part 2

In the previous Economy at a Glance, there was an examination of ‘total’ housing starts in the largest urban centers in the U.S. and Canada.

2015 ‘actuals’ and year-over-year percent changes were laid out in two tables for 12 cities south of the border and six on the northern side.

The figures are being called ‘starts’, although for the U.S. centers they are actually derived from residential building permits.

The city definitions are based on broad boundaries that include downtown cores and nearby suburbs with close commuting ties.

In this current EAAG , the focus will be narrowed to the single-family market.

Nation-wide in the U.S., single-family starts are now accounting for about two-thirds of total starts, with multiples making up the other 33%. (In Canada last year, the proportions were the reverse, 35% for singles and 65% for multiples.)

The share in the U.S. taken by ‘singles’ has dropped dramatically over the past several years. A decade ago, it wasn’t uncommon for singles to be as much as 80% of total starts.

There has been a clear trend away from new residential construction in the ‘boonies’ and towards high-rise living under ‘big city lights”. Both young adults, leaving academia and launching their careers, and aging empty-nesters are enjoying the convenience of close-at-hand entertainment, shopping and all manner of other amenities.

One interesting way to measure this shift is to compare average annual single-family starts over the past ten years with the ‘mean’ over the most recent five years. (And keep in mind that the 10-year average has an unfavourable bias on account of capturing the worst of times in 2008-2009.)

For ten of the 12 largest U.S. cities, the most recent five-year average is lower than the 10-year average. In three cases, the drop has been considerable. Chicago has gone from a 10-year annual average of 9,500 units for single-family starts to a five-year average of 6,500.

Dallas-Fort Worth has fallen back from 22,300 to 20,900 and Atlanta from 17,600 to 13,400.

Only Boston (4,400 units on average over both 10 and five years) and San Francisco (3,500 units according to both time frames) have stayed the same.

None of the cities among America’s 12 largest has recorded an annual average increase.

Looking at other U.S. cities beyond the dozen in Tables 3 and 4, Minneapolis-St Paul (6,100 units) and San Diego (2,700 units) have managed 10-year and 5-year averages that are the same in the single-family market.

Denver, remarkably, has eked out a small gain (from 6,500 to 6,700).

A similar pattern has prevailed in Canada. The most readily apparent declining trend in single-family starts in the land of Mounties and maple leaves has occurred in Montreal, but Ottawa-Gatineau, Toronto and Calgary have also exhibited long slides. (Toronto’s +15.8% year over year change in 2015, as shown in Table 4, may have been a random blip.)

To the extent that Edmonton and Vancouver have been bucking the trend, their single-family starts levels have been relatively flat over the past decade to fifteen years, although definitely not on ascendant paths.

From Table 3, the two biggest cities in Texas — Houston (36,700 units) and Dallas-Fort Worth (28,400) — were the frontrunners for single-family starts in the U.S. in 2015.

Scouring through all the Census Bureau/NAHB data yields an additional amazing fact or two. Both Charlotte (11,700 units) and Nashville (10,800) can boast that they recorded single-family starts levels last year that were higher than in New York.

Part 3

2015 ‘actuals’ and year-over-year percent changes were laid out in two tables for 12 cities south of the border and six on the northern side.

Table 6 shows some strikingly large percentage gains in multi-family starts from 2014 to 2015, with New York (+109.6%) — already busting at the seams with high-rise towers — more than doubling its annual volume of groundbreakings.

Miami (+60.4%) and Dallas-Fort Worth (+54.4%) recorded year-over-year multi-unit starts increases that were ahead by more than half. While Miami has staged a nice recovery (to 16,000 units in 2015) in multi-unit starts since its disastrous level (only 1,600 units) in the Great Recession year of 2009, it still remains considerably below its 15-year previous best figure of 23,300 units in 2005.

Dallas, on the other hand, in 2015 (28,000 multi-family units) shot well past its prior most stellar year (18,400 units in 2008).

Boston (+42.5%), Los Angeles (+34.2%) and San Francisco (+30.5%), in 2015, had multi-family starts levels that were close to or better than one-third higher than in 2014.

San Francisco’s 2015 multi-unit starts (8,200) were about on a par with that city’s prior best (8,600 in 2006), while both Boston (10,400 units in 2015 versus 9,100 in 2005) and Los Angeles (25,200 in 2015 compared with 19,800 in 2006) were over-achievers.

Multi-unit starts have been progressing steeply higher for the past six years in a row in Los Angeles. Boston has recorded mainly sharp inclines over the most recent four years.

Among other major U.S. centers that don’t make it into the top dozen for population, Seattle’s multi-unit starts curve displays an impressively steep upward trajectory beginning in 2010.

Charlotte, since 2011, and Nashville, stepping out a year later in 2012, have also seen rocket-like climbs in their multi-family starts curves.

There are three U.S. cities that are still notably locked in the total housing-starts basement, relative to their historical performances — Chicago, Phoenix and Las Vegas.

Worst among these is Las Vegas, where there have been only minimal improvements in single- and multi-family starts over the past several years. Total new housing permits/starts in Las Vegas in 2015 (10,600 units) were just one-quarter as high as in the admittedly ‘bubble’ year of 2005 (39,200).

Washington, Philadelphia, St. Louis, Minneapolis-St. Paul and Tampa are other major U.S. cities where some single- or multi-family housing-start gains have been made since the debilitating credit crunch in 2008-2009, but there is still a great deal of ground to re-take.

In Canada, both Toronto (+61.5%) and Edmonton (+59.5%) recorded multi-family home starts in 2015 that exceeded 2014 levels by more than 50%.

With only an occasional correction, Toronto’s frenetic condo construction activity has been lighting up the skyline and contributing to the ambient background noise for an extended period now.

As for the outlook, the bargain-level price-point of the ‘loonie’ will continue to attract the attention of well-heeled foreign investors who are looking to diversify their real estate assets.

Edmonton’s surge in multi-family starts in 2015 was in defiance of the everyday bad news coming out of the province’s energy patch, concerning falling oil prices and the necessity for cost cutting to be realized through staffing reductions and drastic curtailments of capital spending.

Edmonton, as Alberta’s provincial capital, is a government town and therefore partly protected from the economic vagaries that are swirling around it, but 2016 will almost surely yield a decline in all forms of starts commensurate with what will also be happening in Calgary, where most oil extraction, exploration and field-servicing companies are headquartered.

Montreal’s annual multi-family starts have stayed in a commendably consistent range of 14,000 to 18,000 units over the past 12 years. Since 2004, upheaval elsewhere has caused nary a flicker of upset in that city’s high-rise residential construction market.


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