Housing sees mixed signs of improvement in December
Declining mortgage rates are translating into mixed improvements in home production.
Total housing starts in December were at a seasonally adjusted annual rate of 1.460 million, falling 4.3% from the revised November estimate of 1.525 million.
But the latest New Monthly Residential Construction report, released this morning jointly by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, is 7.6% above the December 2022 rate of 1.357 million.
Single-family housing starts fell 8.6% to a rate of 1.027 million below the revised November figure of 1.124 million.
The December rate for units in buildings with five units or more was 417,000, climbing 7.5% above the prior month.
Total housing starts for 2023 were 1.41 million, a 9% decline from the 1.55 million total from 2022. Single-family starts in 2023 totaled 945,000, down 6% from the previous year while multifamily starts in 2023 totaled 469,000, down 14.4% compared to the previous year.
“Mortgage rates steadily fell below 7% in December, and lower rates combined with a lack of existing inventory in most markets helped to keep single-family production above a one million-unit annual pace,” said Alicia Huey, chairman of the National Association of Home Builders (NAHB) and a custom home builder and developer from Birmingham, Ala. “And the fact that our latest surveys showed a big increase in builder confidence is an indicator that we can expect housing starts to improve in the coming months. Overall, 2023 was a challenging year for new home construction as housing took a hit due to higher rates and tight monetary policy.”
The latest NAHB/Wells Fargo Housing Market Index (HMI), released yesterday, saw building confidence rise by 7 points to a reading of 44.
“Moderating mortgage rates are expected to provide a boost to new home construction in 2024, but an uptick in building material prices and a shortage of buildable lots and skilled labor are serious challenges for home builders,” Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis. “A rise in single-family permits is a sign that we will see the single-family market pick up steam in the near future. However, due to tighter financing, the multifamily market will weaken.”
Overall permits increased 1.9% to a 1.50 million unit annualized rate in December and are up 6.1% higher compared to December 2022.
Single-family permits increased 1.7% to a 994,000 unit rate and up 32.9% compared to the previous year. Multifamily permits increased 2.2% to a 501,000 pace.
Here’s how starts and permits performed on a regional and year-to-year basis:
- Combined single-family and multifamily starts are 20.1% lower in the Northeast. On a month-over-month basis, single-family starts fell 18.1% Total permits in the Northeast are 21.3% lower on a year-over-year basis as single-family permits are down 10.5% from November. But total permits jumped by 20.2% on a month-over-month basis.
- Combined starts fell 10.7% in the Midwest. Single-family starts plunged 24.3% compared to the prior month. December Single-family permits moved ahead 3.4% from November as total permits climbed 4.7%.
- In the South, total starts dropped 5.5% year-over-year. Single-family starts declined 5.1% compared to November. But total permits rose by 8.4% as single-family permits edged ahead 2.1% from November.
- Overall starts in the West declined 11.6%. Single-family starts slipped 0.8% from the previous month. Single-family permits saw a 3.2% rise on a month-over-month basis, however. Total permits fell by 16.3%.
