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Numbers: U.S. homebuilders began building homes at a seasonally adjusted annual rate of 1.67 million in December, a 5.8% increase from the previous month’s figure, the US Census Bureau reported Thursday.
New housing permits were issued at a seasonally adjusted annual rate of 1.71 million, up 4.5% from November.
Compared with December 2019, housing starts are up 5% while permits are up 17%. This is the highest level of housing starts and building permits since 2006.
Both figures exceeded analysts’ expectations, reflecting growth in the single-family home sector. Economists polled by MarketWatch expected housing starts to occur at a rate of 1.56 million and building permits to arrive at a rate of 1.61 million.
What happened: Growth in the single-family home sector has led to higher housing starts and building permits. On a monthly basis, single-family home starts rose 12%, while single-family home building permits rose 7.8%. Comparatively, new construction on multi-family buildings fell 15.2% between November and December, while multi-family permits for buildings with five or more units fell 2%. Permits for duplexes, triplexes and quadplexes fell 11.5%.
On a regional basis, all regions of the country saw increased permitting activity except the northeast, where it fell by about 7.2%. Although even in the Northeast, single-family permits have increased on a monthly basis.
Likewise, the Northeast was the only region to experience a drop in housing starts – both overall and for the single-family home sector. The Midwest saw the strongest growth in housing starts, with an increase of 32%.
The big picture: Buyer demand could slow amid high home prices and lack of inventory, but remains high compared to last year. This gives builders “a strong incentive to keep building,” said Danielle Hale, chief economist at Realtor.com.
Overall, housing starts for 2020 are up nearly 12% from 2019, despite last spring’s slowdown caused by the pandemic. Builder optimism could weaken slightly in the face of slower pedestrian traffic from buyers and rising costs associated with the purchase of land and materials. But the underlying need for new homes is still there, which is expected to occupy the building industry for some time to come.
What they say: “New mortgage applications are also on the rise, perhaps to keep pace with higher interest rates. Despite weak population growth, residential construction remains well supported by (so far) historically low mortgage rates, record resale listings and the migration of teleworkers to the suburbs, ”wrote Michael Gregory, deputy chief economist at BMO Capital Markets. in a research note.
“Housing starts have recovered and reached their fastest pace in over 14 years. Incredible, given the COVID-related downturn in the spring. There aren’t enough homes in this country to go around, and we need a long-lasting wave of construction to keep up with demand, ”said Holden Lewis, real estate and mortgage expert at the UK. NerdWallet personal finance website.
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