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Key Takeaways
- Housing starts in December came in 4.3% lower than the prior month, when they surged 11%, but were 7.6% higher than the same month last year.
- The 1.46 million housing start rate was better than the 1.43 million reading that analysts were expecting.
- Rising building permits indicate builders plan more construction, as activity remains near pre-pandemic levels, an analyst said.
Construction on new housing dropped in December, but it was still more than analysts were expecting, while building permits showed that homebuilders remained confident about the direction of the housing market as mortgage rates have moved lower.
Housing starts came in at a 1.46 million annual rate in December, a 4.3% drop from the 1.53 million reported by the Census Bureau for November. That’s above the 1.43 million reading that analysts were expecting. Compared with the December 2022 rate of 1.36 million, last month’s reading showed a 7.6% increase.
The December drop follows a big jump in the prior month, where the report showed that November’s revised-lower figures were still nearly 11% higher than October’s reading. Analysts said the report showed the housing market is poised to continue to improve.
“Despite the month-over-month decline in December starts, construction activity remains close to pre-pandemic levels,” Jeffrey Roach, LPL Financial chief economist, said. “The low supply of existing homes on the market is nudging potential buyers to new construction.”
The report for December comes amid increasing optimism in the housing market as mortgage rates declined to about 6.7% last week from around 7.8% in October. The homebuilder sentiment index moved higher for the second consecutive month, while some homebuilding industry executives have also forecast an improving market in comments made during recent earnings calls.
This can also be seen in building permit figures, which serve as an indicator of future construction, Roach said. At a 1.5 million annual rate in December, building permit rates came in above the 1.48 million forecast, and 1.9% higher than the prior month.