U.S. Housing Starts Surged Last Month to Highest in 13 Years
(Bloomberg) -- Groundbreakings on new U.S. homes surged in December to a 13-year high, giving the housing market momentum heading into the new year amid low mortgage rates, solid job growth and optimistic buyers and builders.
Residential starts rose 16.9% to a 1.61 million annualized rate after an upwardly revised 1.375 million pace in the prior month, according to government figures released Friday. The gain was the biggest in three years and well above all estimates in a Bloomberg survey. Permits, a proxy for future construction, fell 3.9% to 1.42 million.
Shares in homebuilding companies rose at the open of New York trading, with the index climbing to the highest since August 2005.
- The data indicate residential construction added to fourth-quarter growth after contributing in the previous quarter for the first time since the end of 2017. While the spike may not be immediately sustained at these levels, demand has been fueled by mortgage rates near a three-year low as the job market remains resilient and wage gains help put money into the pockets of potential homebuyers.
- Construction of single-family homes rose 11.2% to the highest since mid-2007, while permits for those dwellings decreased 0.5%. Groundbreakings for the multifamily category, which tends to be more volatile and includes apartment buildings and condominiums, jumped 29.8% to the highest since 1986.
- The full-year gain was more subdued, as new-home construction rose 3.2% following 3.9% in 2018. Permits were up 3.9% in 2019.
- Even so, the strong overall reading on starts corroborates a jump in developers’ confidence. U.S. homebuilder sentiment posted the highest back-to-back readings since 1999 in December and January amid a jump in prospective buyers and a bump in the sales outlook.
What Bloomberg’s Economists Say
While there are reasons to be optimistic about the housing sector, December’s stellar performance appears to be mainly the result of unseasonably warm weather generating a pickup in construction activity amid heightened demand. Seasonal activity usually slows in the winter; housing starts typically decline in December.
-- Yelena Shulyatyeva and Eliza Winger
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- The median forecast in a Bloomberg survey of economists called for starts to rise to a 1.38 million pace. Estimates ranged as high as 1.48 million.
- All four regions posted a gain in starts, with the Midwest, South and West showing the best pace since 2006. Starts in the Northeast were the highest since August.
- About 179,000 homes were authorized but not yet started in December, down 6.3% from the prior month.
- The report, produced jointly by the U.S. Census Bureau and the Department of Housing and Urban Development, has a wide margin of error, with a 90% chance that the headline housing starts figure was between a 4.1% and 29.7% gain.
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