The Census Bureau announced that housing starts declined from 685,000 in November (on an annual basis) to 657,000 in December, lower than many analysts expected. Despite the reduced figure, the larger trend remains positive. Housing starts were 526,000 in December 2010, for instance, with residential construction moving mostly upward since then.
Moreover, single-family home construction was a bright spot in these numbers, with new starts up from 450,000 to 470,000 for the month. This is the fourth consecutive month of improvements for new single-family home construction; prior to that, there was greater strength among multi-family units. Similarly, single-family housing permits – a leading indicator of future construction in the sector – were also higher. Total housing permits were virtually unchanged in December, down by just 1,000.
Multi-family starts and permits were lower, bucking their recent trends. Starts fell from 235,000 to 187,000 for the month, and permits were 9,000 units smaller to 235,000 in December. Still, the larger trend has been positive even with the recent volatility. In December 2010, there were 105,000 multi-family units started.
Much of the decline was region in nature, with particular weaknesses in the Northeast and West. The Midwest was the strongest region, with significantly higher starts for both single-family and multi-family housing; whereas, there were modest improvements in the single-family segment in the South.
The positive trend was also observed in the National Association of Home Builders and Wells Fargo Housing Market Index, which was released yesterday. The index rose from 21 in December to 25 in January, with the measure up 11 points since September. The NAHB results show improvements across-the-board, with gains in the single-family market and in each region.
These higher figures are definitely positive news for a sector that has been so hard hit during as a result of the housing bubble bursting.
Yet, NAHB Chief Economist David Crowe tries to put things in perspective. He says, “… caution remains the word of the day as many builders continue to voice concerns about potential clients being unable to qualify for an affordable mortgage, appraisals coming through below construction cost, and the continued flow of foreclosed properties hitting the market.”
Chad Moutray is chief economist, National Association of Manufacturers.