Single-Family Starts Pull Back in December

Total housing starts declined in December after strong readings for prior months due to weather-related delay effects in the fall. Total starts decreased 8% to a 1.19 million seasonally adjusted annual rate, according to the joint data release from the Census Bureau and HUD. Nonetheless, over the course of 2017 single-family starts posted a strong year, increasing 8.5% compared to 2016 to a level of 848,000.

Single-family starts decreased in December, falling 12% to a 836,000 seasonally adjusted annual rate. The December number fell off an exceptionally strong November reading, which was revised up to a 948,000 annual rate. Single-family starts posted strong October and November totals due to bounce-back effects related to prior delays in construction in areas of the country affected by hurricanes and other natural events. Despite the drop in December, the three-month moving average for single-family starts reached a post-recession high rate (890,000), as seen on the graph below.

Single-family permits, a useful indicator of future construction conditions, showed strength in December. They increased 1.8%, reaching a post-recession high rate of 881,000. This matches the current solid reading of the NAHB/Wells Fargo Housing Market Index (72) and the NAHB forecast of 5% growth rate for 2018 for single-family construction. Single-family permits ended 2017 with a total that was almost 9% higher than in 2016.

Multifamily starts were up 1% to a 356,000 seasonally adjusted annual rate in December. For the year, multifamily starts were down approximately 10%, as apartment development levels off and the market finds a balance between supply and demand. NAHB is forecasting a small decline for multifamily construction in 2018. Multifamily permits were down almost 4% in December.

With respect to housing’s economic impact, 55% of homes under construction in December were multifamily (611,000). As shown in the graph above, with recent production declines for apartments, the current count of multifamily units under construction is just slightly lower than a year ago. In December, there were 502,000 single-family units under construction, a gain of almost 12% from this time in 2016.

 

 

 



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