Housing starts decline to two-year low in December
New-home construction in December fell to the lowest since September 2016, as builders held back during a turbulent month for financial markets.
Residential starts fell 11.2% to a 1.08 million annualized rate after a downwardly revised 1.21 million pace in the prior month, according to government figures Tuesday that missed all forecasts. The report, which was delayed by the federal shutdown, also showed permits, a proxy for future construction, edged up 0.3% to a 1.33 million rate, above estimates.
The decline, corresponding with the worst December for U.S. stocks since the Great Depression, underscores the broader slowdown in housing in recent months. Elevated prices continue to challenge buyers, while builders are coping with higher labor and material costs amid tariffs on imported items such as steel. At the same time, declining mortgage rates, along with a solid labor market with rising wages, are likely to support demand.
An earlier report showed homebuilder sentiment in December tumbled to the lowest level in more than three years, according to the National Association of Home Builders/Wells Fargo. The figure has since rebounded, indicating a pickup in optimism for demand this year. The report was originally scheduled for release on Jan. 17.
Single-family starts fell 6.7% to a two-year low and permits for the category slumped. Starts for multifamily homes with five or more units, a category that tends to be volatile and includes apartment buildings and condominiums, fell 22%, the most since November 2016. Starts for November were revised down from a 1.26 million pace.
Three of four regions posted declines, led by a 26.3% drop to the lowest since 2015 in the West. One sign that builders will stay busy in coming months: About 187,000 homes were authorized but not yet started in December, the most since 2007. The report is released jointly by the Census Bureau and Department of Housing and Urban Development in Washington.