The Census Bureau reported that December total housing starts fell 4.3% to 529,000 at a seasonally adjusted annual rate from November’s revised 553,000. The drop in starts was driven by a 9.0% fall in single-family starts from November’s 458,000 to 417,000. Multifamily starts, which are often volatile, jumped 17.9% to 112,000 from 95,000. That still left fourth quarter multifamily starts at 102,000, down from third quarter’s 153,000, and at exactly the same level as in the first half of 2010.

For the year, total starts rose 6.1% to 587,600 from 554,000 from 2009’s 554,000. Single-family starts were up 5.8% and multifamily starts up 7.2%. Total, single-family, and multifamily starts in 2010 were the second lowest on record, above 2009’s all time low for each.

The fall in single-family starts is consistent with the NAHB/Wells Fargo Housing Market Index (HMI), which has been at 16 for three months—a low level, but above its all time low of 8 in January 2009. The slowdown in single-family construction may reflect caution on the part of builders, difficulty for builders in obtaining financing for new projects, and the worse than normal weather events in the Midwest and the South in December that may have resulted in fewer starts than usual for the month. Single-family starts fell 7.4% in the Northeast, 35.7% in the Midwest, and 10.3% in the South. One bright spot emerged in the West where single-family starts rose 23.1%, their highest level since April 2010.

Building permits were another positive. Single-family permits rose 5.5% to 440,000, their highest level since April 2010. Multifamily permits jumped 53.5% to 195,000 after dropping 14.2% in November to 127,000. Although the rise in permits indicates some optimism on the part of builders going forward, which has been reflected in the HMI’s reading for builders’ expectations for sales in the next six months, new building codes that will take effect in January in some states may have prompted builders to pull permits at a faster than usual rate in December.

NAHB’s forecast is for total housing starts to rise 20.6% to 708,000. As already noted, this is off a low level of starts for 2010. The level of starts also represents less than half the starts needed by the nation over the longer run due to population growth and to replace damaged and demolished housing units.