New Housing Starts Eased in December, but Up 10.8 Percent in 2015

The Census Bureau and the U.S. Department of Housing and Urban Development said that new housing starts eased 2.5 percent, down from an annualized 1,179,000 in November to 1,149,000 in December.  This was near the average observed in the second half of 2015, which was 1,146,000, up from an average of 1,068,000 in the first half of the year. Housing starts averaged 1,111,200 for 2015 as a whole, up 10.8 percent from the 2014 average of 1,003.300. As such, it reflects gradual improvements in residential construction over the longer term, even with the slight pullback in December activity.

Reduced single-family housing starts (down from 794,000 to 768,000) helped to explain the decrease in December, with multifamily activity also off marginally (down from 385,000 to 381,000). On the positive side, single-family residential construction in December was not far from November’s post-recessionary high, and starts in the single-family segment were up 10.4 percent in 2015. Multifamily activity has been more volatile in 2015, ranging from a low of 300,000 in February to a high of 466,000 in September. Yet, multifamily starts have also trended higher, up 11.3 percent for the year.

Housing permits also provided some encouragement, up 12.0 percent in 2015 from the average seen in 2014. Yet, permits edged lower for the month, down from 1,282,000 in November to 1,232,000 in December. The underlying data were mixed, with single-family permits higher (up from 727,000 to 740,000) and multifamily activity lower (down from 555,000 to 492,000). The single-family permits figure was the highest since December 2007, which was the first official month of the Great Recession. Since housing permits can be seen as a proxy of future residential construction activity, this is a real sign of progress and comfort for 2016.

This perhaps helps to explain why homebuilders remain optimistic, as noted in the National Association of Home Builders (NAHB) and Wells Fargo report released yesterday. The National Association of Home Builders (NAHB) and Wells Fargo said that the Housing Market Index (HMI) was unchanged in January at 60. Numbers over 50 indicate that builders are more positive than negative on net in their views of the housing market. January’s reading was the seventh consecutive month with the HMI at 60 or higher, suggesting that home builders remain mostly optimistic about the current pace of growth. Still, the headline number has decelerated after reaching a 10-year high of 65 in October, with sentiment easing a bit since then. Data were weakest in the Northeast and strongest in the West, and confidence picked up a little in January in the Midwest.

Moving forward, home builders remain upbeat about single-family sales over the next six months. While the sales index of expected single-family activity has decelerated from 75 in October to 63 in January, this continues to indicate strong demand expectations in the outlook.

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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