Privately-owned housing starts in December grew at a seasonally adjusted annual rate of 1.669 million units, according to data out this week from the U.S. Census Bureau. That was a 5.8 percent increase from November’s upward-revised print, significantly better than the median forecast, and the highest monthly reading since 2006. All of the headline strength was due to a 12.0 percent jump in single-family starts, whereas multi-family (rental) units fell by 15.2 percent in December. This is likely in part a reflection of the continued exodus from population-dense city centers into the suburbs, helped of course by the remote work boom that has greatly lessened the need for many Americans to live in close proximity to where they work. Changing regional preferences might have also influenced the December figures because all of the declines last month were concentrated in the Northeast. Looking ahead housing starts are set to remain solid in early 2021 because total building authorizations in December rose by 4.5 percent to a seasonally adjusted annual rate of 1.709 million units.
That was better than expected and again all of the strength was due to the single-family segment, where permits climbed to a roughly 14-year high last month. Many other housing reports released recently, though, have not looked as favorable but for now such weakness can likely be attributed to a combination of weather-related headwinds, the winter flare up in the pandemic, and perhaps simply some healthy moderation following many months of above-trend growth in the overall real estate market. More importantly, even though several housing datapoints might have disappointed analysts forecasts recently they are still by most historical comparisons overwhelmingly encouraging. For example, the NAHB’s homebuilder confidence index fell to 83 this month, the lowest reading since September but still 7.8 percent above the pre-COVID record high. None of this is to suggest that the housing market is without any challenges, and the NAHB report even noted that “Despite robust housing demand and low mortgage rates, buyers are facing a dearth of new homes on the market, which is exacerbating affordability problems. Builders are grappling with supply-side constraints related to lumber and other material costs, a lack of affordable lots and labor shortages that delay delivery times and put upward pressure on home prices. They are also concerned about a changing regulatory environment.”
Sources: Econoday, U.S. DoC, NAHB, FRBSL