But Could ‘Easily’ Exceed 1.3 Million This Year
Home-building activity stumbled in December, with housing starts down 8.2 percent to a rate of 1,192,000, according to the latest data from U.S. Census Bureau and the Department of Housing and Urban Development (HUD). Single-family housing starts decreased 11.8 percent to 836,000. Starts for units in buildings with five units or more came in at 352,000.
Also below expectations were permits, but only 0.1 percent from November, to 1,302,000, according to the data. Single-family permits were up 1.8 percent to 881,000. Permits for units in buildings with five units or more came in at 382,000.
Completions totaled 1,177,000 in December, rising 2.2 percent. Single-family completions increased, as well, 4.3 percent to 818,000. Completions for units in buildings with five units or more came in at 346,000.
“The latest decline in the volatile housing starts data is disappointing, but surely not lasting,” said Lawrence Yun, chief economist of the National Association of REALTORS® (NAR), in a statement. “New-home construction still closed out 2017 as expected, with 1.2 million units—the best since 2007. Given that the sales for both new and existing homes sold briskly throughout last year and at notably higher prices, housing starts should easily surpass 1.3 million in 2018.
“Some relaxing of regulatory rules in small-sized community banks will help improve credit conditions for developers,” Yun said. “Should more construction come about, the much needed additional inventory will help calm home price appreciation. That would be a good trend for housing affordability, especially in a likely higher mortgage rate environment later this year.
“The new tax bill, which caps mortgage interest and property tax deductions, was not the chief reason for last month’s decline,” said Yun. “About 95 percent of new homes are priced below $750,000. Still, home builders will do well to focus on moderately-priced homes catering to first-time buyers. The entry-level price point is in dire need of new inventory heading into the spring.”
“The December new construction report shows home-building is inching along with permits up slightly, starts slipping and housing completions up, but construction overall remains woefully behind the levels necessary to quench buyer demand,” says Joseph Kirchner, senior economist for realtor.com®. “Last month, 1.2 million new homes were started, but the U.S. still needs 893,000 additional housing starts to get us back to normal levels.”
According to the Census and HUD, there were approximately 1,152,300 completions and 1,202,100 housing starts last year.
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Housing Starts Trip Up