The numbers: U.S. home builders began building homes at a quarterly adjusted annual rate of 1.67 million in December, representing a 5.8% increase from the previous month’s figure, the U.S. Census Bureau reported Thursday.
Permission for new homes at an annual rate of 1.71 million changed quarterly, up 4.5% from November.
Compared to December 2019, housing starts were up 5%, while permits were up 17%. This was the highest starting point for housing and building permits have reached since 2006.
Both figures came in above analysts ’expectations, reflecting growth in the single-family sector. Economists surveyed by MarketWatch had expected housing to start at 1.56 million and building permits to come in at 1.61 million.
What happened: Growth in the single-family sector led to both housing starts and building permits. Each month, single-family starts increased 12%, and single-family permits increased 7.8%. In contrast, new build on multi-storey properties fell 15.2% between November and December, while multi-faceted permits for buildings with five or more units fell by 2%. Permits for duplexes, triplexes and quadplexes fell 11.5%.
On a regional basis, all parts of the country saw an allowable increase in activity except the North East, where it fell by about 7.2%. Although even in the Northeast, one family’s permits were up every month.
Similarly, the North East was the only area to see the onset of a housing decline – both as a whole and for the single-family segment. The largest growth in housing began in the Midwest, with a 32% increase.
The big picture: Demand among buyers may be cooling despite high home prices and a lack of inventory, but it has still risen compared to last year. That provides a “strong incentive for builders to keep going,” said Danielle Hale, chief economist for Realtor.com.
Overall, housing start-ups for 2020 were up nearly 12% from 2019, despite the slowdown last spring with the pandemic. Builders’ hopes may wane slightly against slow foot traffic from buyers and rising costs associated with buying land and materials. But the fundamental need for new homes remains, which should keep the construction sector busy for some time to come.
What they say: “New mortgage applications are rising again, perhaps to get ahead of higher interest rates. Despite slow population growth, residential construction is well supported by (so far) low mortgage rates, non-stop resale lists, and the migration of teleworkers to peripheral areas, ”wrote Michael Gregory, interest Chief Economist at BMO Capital Markets. in a research note.
“Housing is starting to recover and they have been at their strongest pace in over 14 years. Surprisingly, considering the COVID-related decline in the spring. There are not enough homes in this country to turn around, and we need a long-term build increase to meet demand, ”said Holden Lewis, a home and mortgage expert at NerdWallet’s personal finance website.