December Housing Starts Dip

Warm December weather didn’t appear to help housing starts, HUD and the Census Bureau reported yesterday.  

HUD/Census said privately owned housing starts in December fell by 2.5 percent from November to 1.149 million, seasonally adjusted for annual growth. This compares to 1.179 million in November. From a year ago, housing starts improved by 6.4 percent.  

Single-family housing starts in December fell by 3.3 percent to 768,000 from November’s revised 794,000. Units in buildings with five units or more fell to 365,000, a 3.4 percent drop from November’s 378,000.  

For all of 2015, HUD/Census estimated 1.111 million housing units started in 2015, 10.8 percent higher than 2014 figure (1.003 million).   Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C. said the unexpected drop in housing starts was well below expectations and could be attributed in part to seasonal adjustment factors.  

“December’s decline could be payback for the large jump in activity in November,” Vitner said. “Despite the weak monthly reading, new construction in single- and multifamily are still bright spots for the U.S. economy.”  

Building permits fell as well in December, HUD/Census said. The report said privately owned housing units authorized by building permits in December fell to a seasonally adjusted annual rate of 1.232 million, 3.9 percent below November’s revised 1.282 million, but 14.4 percent higher than a year ago (1.077 million). Single-family authorizations rose by 1.8 percent to 740,000; authorizations of units in buildings with five units or more fell by 13.5 percent to 455,000.  

HUD/Census estimated 1.178 million housing units authorized by building permits in 2015, 12.0 percent higher than 2014 (1.052 million)  

Privately owned housing completions in December rose by 5.6 percent to 1.013 million from November’s revised 959,000 and improved by 7.9 percent from a year ago (939,000). Single-family housing completions rose by 8.8 percent to 696,000; the December rate for units in buildings with five units or more improved by 0.3 percent to 307,000.   HUD/Census estimated 965,700 housing units completed in 2015, 9.3 percent higher than a year ago (883,800).  

“Volatility in the seasonally slow period of the year is expected and monthly readings should be taken with a grain of salt,” Vitner said. “Underlying fundamentals, including improving labor market conditions and household formations, suggest there is more room to run. Moreover, lending conditions for residential mortgages continue to ease.”  

Vitner added that the positive outlook in starts “continues to reflect a vote of confidence for the domestic economy.”