Housing starts in the U.S. dropped sharply in the month of December. Starts fell 11.2 percent to 1.08 million from a downwardly revised 1.21 million in November. The fall was widespread with the volatile multi-family segment, dropping 20.4 percent to 320k units. Single-family starts also fell 6.7 percent to 758k units. The median consensus forecast was for starts to have stayed the same.
Building permits rose marginally by 0.3 percent to 1.33 million. The gain was concentrated in the multifamily segment, which was up 4.9 percent for the month, while single family permits dropped 2.2 percent. The regional outturn was on the negative side. While starts in the Northeast remained the same, all other regions recorded a drop.
December month’s print was a disappointing end to what has been a rough few months for the residential construction market, with starts falling to the lowest level since September 2016. However, for the year, starts were up 3 percent.
The fall in starts to close the year partly shows the volatility of financial markets in the period that may have rattled builder sentiment, resulting in a three-year low for homebuilder sentiment in December, noted TD Economics in a research report.
“Residential building construction has decelerated recently suggesting that contribution to economic activity in Q4 was likely much more muted. While buyers have been grappling with elevated prices and a dearth of inventory, the recent decline in mortgage rates and uptick in wages should support demand going forward. To this end, residential activity is expected to rebound modestly in 2019”, added TD Economics.
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