Housing starts bounce back in December on multifamily surge

Dive Brief:

Housing starts rose 11.3% in December to a seasonally adjusted annual rate of 1.226 million from November's revised estimate of 1.102 million, the Commerce Department reported Thursday. December's figure is up 11.3% from November and is 5.7% ahead of the December 2015 rate. Overall, 1.166 million housing units were started in 2016 — a 4.9% increase from 2015.
Building permit authorizations, an indicator of future construction activity, dipped slightly from the adjusted November rate of 1.212 million to 1.210 million in December, but came in 0.7% above the year-ago mark.
Single-family starts dropped off 4% to 795,000 from November's adjusted figure of 828,000, but were up 3.9% from a year ago. Multifamily starts swung back 53.9% from November at a rate of 417,000 starts in December and are up a modest 10.3% from a year earlier.

Dive Insight:

Housing starts' solid month came on the strength of an upswing in multifamily, while the single-family category continues its belabored recovery. As multifamily continues to cool from its post-recession boom, experts have expressed concern that the drop-off could impact overall housing starts figures.

Trends suggest factors like a tight regulatory environment and a persisting labor shortage could dull the effects of a boom in new construction activity. Predictions hold that areas where construction activity is slow — such as those in Ohio and New Mexico — should see the greatest percentage increases in new single-family construction over the next two to three years. Regions with strong job growth spurring a population influx and increased demand for new construction — namely the Sun Belt states — should experience the largest absolute increase in construction.

Builder confidence in the market for new single-family housing demand leveled off this month. The National Association of Home Builders/Wells Fargo Housing Market Index reported numbers slipped two points from a downward-adjusted December figure to 67 for the month of January. The month also saw all three HMI markers decrease, signaling a slow start to 2017.

As the U.S. looks to the inauguration of its next leader, it remains unclear how a new presidential administration and Republican-led Congress could impact the market. Builders are hopeful that Trump’s promises of housing finance reform and nixed regulations — measures that, combined, are expected to deflate overall construction costs — and could jumpstart new housing projects.

For more housing news, sign up for our daily residential construction newsletter.