The Rising Trend in California Construction Starts

Single family residential (SFR) starts rose 10% over one year earlier in the six-month phase ending September 2018. Multi-family construction starts also increased, rising 7% from a year earlier. This rate of rise is down from earlier in 2018 for both types of construction.

Multi-family construction was down in 2016 but rebounded slightly in 2017, ending the year 6% above 2016. Demand for multi-family rentals has generally been higher during this residential construction recovery compared to new SFRs. However, buyer-occupant demand for SFRs is gradually increasing as jobs are recovered.

SFR construction starts picked up speed in 2017, turning in a 17% increase over 2016. Expect SFR construction to continue to rise at a similar pace through much of 2018. But compared to the 150,000 SFR starts achieved in 2005 at the height of the boom, even 2017’s positive performance – resulting in 58,000 SFR starts – is a fraction of what is needed to meet demand.

Multi-family construction reports showed a slight 6% increase in 2017. However, rental vacancies remain low in 2018, meaning multi-family construction will need to rise considerably, and soon. Like SFR construction, multi-family starts are at a fraction of what is needed to keep up with rising demand from California’s growing population. 

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