Homebuilders fell less than expected as new home construction began in December while building permits issued rose, indicating a continued recovery in the housing market.
New residential construction, including single-family homes and multifamily homes, fell 4.3% in December from the previous month at an annual rate of 1.460 million units, according to data from the Bank of England. The Census Bureau released Thursday. The results were higher than the expectations of economists surveyed by Bloomberg by 1.425 million units.
Approved housing 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 exceeded expectations by 1.477 million units, according to data from Bloomberg.
“Most of the decline in housing construction reflects a partial reversal of the rise in November, but less volatile permit numbers suggest the steady upward trend in single-family construction will continue,” said Kieran Clancy, chief U.S. economist at Harvard University. Pantheon Macroeconomics Post-Release Books.
Multifamily buildings with five or more units started at 417,000 units for December, slightly higher than the 404,000 units the previous month. The number of permits to begin construction on multiple properties containing five or more units reached 449,000 units in December, an increase of 3.2% over the previous month.
“Fall in a month [for housing starts] “This was a surprise to us given that November's strength was due to it being an unseasonably warm and dry month, and last month was the warmest December on record,” wrote Thomas Ryan, real estate economist at Capital Economics.
“Looking ahead to this year, we don't think mortgage interest rates will fall enough to cannibalize the mortgage interest rate and cause a meaningful rebound in supply,” Ryan added. “Against this backdrop, demand will continue to be shifted to new buildings, which will also encourage stronger construction activity.”
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