Homebuilders pulled back less than expected on the start of construction for new homes in December while permits issued to build rose, signaling a continued recovery in the housing market.
New residential construction, including single family and multifamily homes, fell 4.3% in December from the month prior to an annualized rate of 1.460 million units, according to data from the Census Bureau released Thursday. The results were higher than the forecast of 1.425 million units from economists surveyed by Bloomberg.
Authorized residential permits — an indicator of future activity — rose 1.9% to a rate of 1.495 million units in December, up from November's revised rate of 1.467 million units. This beat forecasts for a rate of 1.477 million units, according to data from Bloomberg.
"Most of the drop in housing starts reflects the partial reversal of the spike in November single-family starts, but the less-volatile permits numbers suggest that the steady uptrend in single-family construction will continue," Kieran Clancy, senior US economist at Pantheon Macroeconomics, wrote following the release.
Starts on multifamily structures with five or more units landed at 417,000 for December, slightly higher than the previous month's 404,000 units. Permits to start construction on multiple properties with five or more units reached 449,000 units in December, a 3.2% increase from the previous month.
"The fall on the month [for housing starts] was something of a surprise to us given that November’s strength was caused by it being an unseasonably warm and dry month, and last month was the warmest December on record," wrote Thomas Ryan, property economist at Capital Economics.
"Looking ahead to this year, we don’t think mortgage rates will fall enough to unwind mortgage rate 'lock-in' and cause a meaningful recovery in supply," Ryan added. "Against that backdrop, demand will continue to get diverted to newbuilds, which will also encourage stronger construction activity."
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