The numbers: U.S. homebuilders began building homes at a seasonally adjusted annual rate of 1.67 million in December, up 5.8 percent from the previous month, the U.S. Census Bureau reported on Thursday.
New housing permits took place at a seasonally adjusted annual rate of 1.71 million, up 4.5% from November.
Compared to December 2019, housing starts increased by 5%, while permits increased by 17%. It was the highest level of housing establishment and building permits have been in place since 2006.
Both figures exceeded analysts’ expectations, reflecting growth in the single-family sector. Economists surveyed by MarketWatch expected homes to start rising at a rate of 1.56 million and building permits to enter at a rate of 1.61 million.
What happened: The growth in the single-family sector has led to an increase in both housing developments and building permits. Each month, single-family starts increased by 12%, while single-family permits increased by 7.8%. In comparison, new construction of multifamily buildings decreased by 15.2% between November and December, while multifamily permits for buildings with five or more units decreased by 2%. Permits for duplexes, triplexes and quadplexes decreased by 11.5%.
At the regional level, all parts of the country saw an increase in licensing activity, with the exception of the Northeast, where it fell by around 7.2%. Although even in the Northeast, single-family permits have increased monthly.
Similarly, the Northeast was the only region to see a decline in housing growth – both overall and for the single-family sector. The Midwest saw the largest increase in the number of homes, with an increase of 32%.
The whole picture: Demand among buyers could cool in the face of high house prices and a lack of inventory, but remains high compared to last year. This gives builders “a strong incentive to continue building,” said Danielle Hale, chief economist for Realtor.com.
Overall, the start of housing for 2020 has increased by almost 12% compared to 2019, despite the slowdown last spring caused by the pandemic. Builders’ optimism could decline slightly in the face of slowing pedestrian traffic from buyers and rising costs associated with the purchase of land and materials. But the basic need for new homes is still there, which should keep the construction sector busy for some time to come.
What are they saying: “New mortgage applications are also rising again, likely to outpace higher interest rates. Despite the slow population growth, residential construction remains well supported by (so far) record 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 note. Research.
“The beginnings of housing have recovered and have been at the strongest pace in the last 14 years. Amazing, given the COVID-related recession this spring. There are not enough homes in this country to move around and we need a long-term wave of construction to meet demand, ”said Holden Lewis, a housing and mortgage expert at NerdWallet’s personal finance website.