A recent report by the Commerce Department revealed a significant rebound in U.S. residential construction during December, surpassing market expectations. Housing starts soared by 15.8% to an annual rate of 1.499 million, recovering from a 3.7% decline in November to a revised rate of 1.294 million.
This surge marks the highest level of housing starts since February 2024, when the annual rate reached 1.546 million. Economists had anticipated a modest 2.4% increase to 1.320 million, highlighting the scale of this unexpected growth.
Multi-Family and Single-Family Housing Growth
The jump in housing starts was driven primarily by multi-family construction, which skyrocketed by 61.5% to an annual rate of 449,000 in December. This rebound followed a steep 30.7% decline in November.
Single-family housing starts also contributed to the rise, increasing by 3.3% to an annual rate of 1.050 million, building on November’s 7.7% growth.
Nationwide Economist Daniel Vielhaber commented on the surge, noting, “Home builders ended 2024 on a high note after months of slower activity.” However, he cautioned that expectations for future sales have moderated due to the likelihood of prolonged higher interest rates.
Building Permits See Slight Decline
While housing starts surged, building permits—a key indicator of future housing demand—declined slightly by 0.7% to an annual rate of 1.483 million in December. This followed a robust 5.2% increase in November.
The decrease was driven by a 5.0% drop in multi-family permits, which fell to an annual rate of 491,000 after a notable 15.4% rise in November. In contrast, single-family permits grew by 1.6%, reaching an annual rate of 992,000 in December.
Homebuilder Confidence Shows Modest Improvement
In a separate report, the National Association of Home Builders (NAHB) revealed an unexpected rise in homebuilder confidence. The NAHB/Wells Fargo Housing Market Index edged up to 47 in January, its highest level since April 2024. Economists had predicted a decline to 45, making this a surprising boost for the sector.
Conclusion
The December surge in housing starts reflects a robust rebound in construction activity, particularly in multi-family housing. While building permits dipped slightly, the rise in homebuilder confidence suggests cautious optimism for the housing market in 2024. However, challenges such as elevated interest rates could temper growth in the coming months.
Insight from RTTNews