Homebuilders pulled back more than expected in December construction starts for new homes.
New residential construction, including single-family and multi-family housing, fell 4.3% from the previous month to an annual rate of 1.460 million units in December. The Census Bureau released Thursday. The results were higher than a forecast of 1.425 million units by economists polled by Bloomberg.
Approved residential permits — indicators of future activity — rose 1.9% to a rate of 1.495 million units in December, up from a revised 1.467 million units in November. According to data from Bloomberg, the beat was forecast at 1.477 million units.
“The drop in housing starts reflects a partial reversal of the spike in single-family starts in November, but the low-volatility permit numbers suggest steady progress in single-family construction will continue,” said senior U.S. economist Kieran Clancy. Pantheon Macroeconomics wrote following the publication.
Five or more units in December landed at 417,000, 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, up 3.2% from the previous month.
“Fall of the month [for housing starts] November's strength surprised us as it was 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 freeze rate 'lock-in' and cause a meaningful recovery in supply,” Ryan added. “Against that backdrop, demand will continue to shift to new buildings, which will encourage stronger construction activity.”