Housing starts down 8% at the end of 2017

Housing starts for December came in 8.2% lower than the previous month with a seasonally adjusted annual rate of 1,192,000

Housing starts down 8% at the end of 2017
Housing starts for December came in 8.2% lower than the previous month with a seasonally adjusted annual rate of 1,192,000.

The figure reported by the HUD and the Commerce Dept. is 6% lower than December 2016 although the whole-year rate was 1,173,800, up 2.4% compared to 2016. Single-family home starts were up 8.5% in 2017 compared to 2016 while multifamily unit starts dropped 9.8%.

Total permits issued ended the year with a SAAR of 1,302,000 in December; 0.6% down from November but up 2.8% year-over-year.

Return to normal says NAHB
The National Association of Home Builders says that the figures are a return to trend.

“A return to normal levels of housing production this month is expected after a very strong fall season,” said NAHB Chief Economist Robert Dietz. “We saw a surge of housing activity in the South after hurricane-related delays, and now that region is returning to its positive growth trend.”

Regionally in December, combined single- and multifamily housing production fell 0.9 percent in the West, 2.2 percent in the Midwest, 4.3 percent in the Northeast and 14.2 percent in the South.

NAHB is forecasting single-family units to continue to drive new home construction in 2018 with a 5% increase to 893,000 units. Multifamily is forecast to fall 1.6% to 354,000.

Some relief for supply
There were 1,177,000 homes completed in December, up 2.2% from November and up 7.4% from December 2016. For the whole of 2017, an estimated 1,152,300 homes were completed, up 8.7% from 2016.

“The annual amount of completions necessary just to keep pace with growing millennial demand and eliminate the housing shortage is estimated at around 1.5 million units (the housing starts historical average) – we are just
falling short,” commented Mark Franklin, chief economist at title insurer First American.

Tax plan should help builders
Mortgage lender LendingTree is expecting 2018 to show further improvement for the housing sector, with builder confidence elevated.

“The tax plan will also increase builder margins by 10-15%, encouraging more activity including at the lower end which has been underserved in the recovery,” said LendingTree Chief Economist Tendayi Kapfidze. “While the strengthening of single-family starts is encouraging, new construction remains subdued relative to the size of the population indicating room for further gains.