December's Housing Starts Surged to 13-Year High

While permits fell from the previous month, the U.S. Census Bureau and the Department of Housing and Urban Development said December was another exceptional month for residential housing starts.

Those starts soared to a seasonally adjusted annual rate of 1,608,000 during the month, a 16.9 percent increase from November's estimate which was revised from 1,365,000 to 1,375,000. The December number was the highest monthly rate for starts since the same month in 2006 and was 40.8 percent higher than last year's December pace.

Both single-family and multifamily construction were strong. Single-family starts rose 11.2 percent to an annual rate of 1,055,000 from the revised (from 938,000) rate of 949,000 in November. Single-family starts were 29.6 percent ahead of last December's rate of 814,000. There 536,000 multi-family starts on an annualized basis, up 32.0 percent from November and 74.6 percent year-over-year.

Mike Fratantoni, the Mortgage Bankers Association's Chief Economist urged against too much optimism based on December's report. "On a seasonally adjusted basis, housing starts jumped in December to their highest level in 13 years. While single-family permits are up almost 11 percent relative to last year, the level suggests that this jump in starts is unlikely to persist, and we would expect them to return back below 1 million this spring. However, the trend in activity remains quite positive, and as more units are completed, inventories will grow, and this will support a faster pace of home sales in the spring of 2020."

Analysts greatly underestimated their forecasts for December housing starts. Those polled by Econoday were looking for the results to be in a range of 1.3 to 1.4 million with a consensus of 1.373 million.

On a non-adjusted basis there were 108,500 residential units started during the month compared to 103,100 in November and 76,000 the previous December. Single-family starts accounted for 68,600 of the units, a decline of 100,000 month-over-month but much higher than the 52,600 single family starts in December 2018.

Housing starts rose in every region on both a monthly and an annual basis. In the Northeast they increased by 25.5 percent from November and were up 18.8 percent year-over-year. The Midwest saw gains of 37.3 percent and 85.4 percent for the two periods respectively. Starts in the South were 9.3 percent higher than in November and 23.7 percent above those in December 2018. The West posted increases of 19.8 percent and 72.7 percent respectively.

Permits for residential construction were issued at a seasonally adjusted annual rate of 1,416,000, a decline of 3.9 percent from the 1,474,000 rate in November, which was a revision from the original estimate of 1,482,000. Permitting was still higher by 5.8 percent than in December 2018.

Analysts had expected the metric to decline, forecasting results between 1.320 and 1.474 million. The consensus was 1.458 million.

Single family permits were down by 0.5 percent to 916,000 from 921,000 (revised from 918,000) in November but were 10.8 percent higher than a year earlier. Multifamily permits plunged by 11.1 percent to a rate of 458,000, an annual decline of 3.0 percent.

In unadjusted numbers, 107,300 permits were issued during the month, 62,400 of them for single-family houses. In November the respective numbers were 107,500 and 63,800 and in December 2018, 96,600 and 53,400.

Permits dropped by 15.7 percent compared to November in the Northeast and were 11.7 percent higher on an annual basis. The Midwest saw an uptick of 0.5 percent in permitting for the month and it was 42.8 percent higher than in December 2018. The South's rate was down for both periods, by 6.5 percent and 0.1 percent respectively while the West moved higher by 3.8 and 0.5 percent.

Residential units were completed at an annual rate of 1,277,000, up 5.1 percent from November and a 19.6 percent year-over-year gain. Single family completions were at a rate of 912,000, up 0.7 percent and 17.8 percent from the two earlier periods. The pace of multifamily construction was 19.4 percent higher than in November at 357,000 units and up 26.1 percent on an annual basis.

Completions rose 47.7 percent from November in the Northeast and were more than double the number a year earlier at 102.6 percent. They fell in the Midwest by 8.9 percent for the month but remained 9.9 percent higher on an annual basis. Completions ticked down 0.5 percent in the South but maintained an 18.9 percent edge year-over-year. In the West completions grew by 9.4 percent and 4.2 percent from the two earlier periods.

At the end of the reporting period there were an estimated 1,192,000 million units under construction, 534,000 of them single-family units. There were another 179,000 permits outstanding, 86,000 of them for single-family residences.

Year-to-date (YTD) numbers for the last month of the year show some improvement in all three measures over 2018. Permits totaled 1,368,800 compared to 1,317,900 in December of 2018, an increase of 3.9 percent. Single-family permits rose only 0.1 percent but those for units in buildings with five or more grew 10.8 percent.

YTD, there were 1,289,800 new residential units started, a 3.2 percent rate of growth. Single family starts rose 1.4 percent and multifamily starts were up 7.8 percent.

The greatest gains were in the number of completed units. The total of 1,250,600 through the end of December was 5.6 percent higher than the prior year. Single family starts rose 7.4 percent and multifamily completions were up 1.0 percent.