Housing Starts Come Back Down to Earth in December, but Still Suggest Recent Progress

By January 17, 2014Economy

The Census Bureau and the U.S. Department of Housing and Urban Development said that housing starts come back down to Earth in December after soaring in November. The annualized pace of new housing starts dropped from a revised 1,107,000 in November to 999,000 in December. (The November figure was originally estimated to be 1,091,000.) Still, the trend over the past few months has been a positive one, with housing starts up from 873,000 at the annual rate in September.

In addition to severe winter storms, which might have contributed to the deceleration in activity in December, higher mortgage rates might have had an impact, too. Freddie Mac reported that the average 30-year mortgage rose from 4.29 percent in the week of November 27 to 4.48 percent in the week of December 26.

In many ways, the November data were a bit of an outlier, and if we were to remove it from the analysis, housing starts have generally moved generally higher, particularly for single-family units. For instance, while new single-family housing starts dropped from 717,000 in November to 667,000 in December, this was still higher than the 600,000 observed in November. In fact, single-family housing starts have risen 7.6 percent over the course of the past 12 months, which is good news.

New multi-family residential construction has been more volatile, and while the longer-term movement has been upward, the data in 2013 was quite choppy. For the month, new multi-family housing starts were off from 390,000 to 332,000. This was still better than the 299,000 recorded in October, but that is not the whole story. This data has been up and down all year. As evidence of this, new multi-family housing starts were 363,000 in December 2012, suggesting a decrease of 8.5 percent year-over-year.

Meanwhile, housing permits declined from a revised 1,017,000 in November to 986,000 in December. The upward trend for permits has been somewhat volatile, as well, with December’s figure more or less equivalent to where it was in May, for instance. The decrease in December stemmed entirely from single-family permits, which fell from 641,000 to 610,000. Multi-family permitting was unchanged at 376,000.

On a year-over-year basis, housing permits have increased 4.6 percent since December 2012. This helps to give us some comfort. Even with some retrenching in the latest data, residential construction activity was up modestly in 2013, and the upward movement at the end of the year suggests continued progress in the new year.

Chad Moutray is the chief economist, National Association of Manufacturers.

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM) and the Director of the Center for Manufacturing Research for The Manufacturing Institute, where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

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