Pace of US homebuilding accelerates in December

Builders are entering 2025 with 'cautious optimism' on the construction outlook, economist says

Pace of US homebuilding accelerates in December

US housing starts surpassed expectations at the end of 2024, hitting their fastest pace since the beginning of last year as multifamily construction surged.

Government data released Friday showed that new residential construction was up by almost 16% in December, reaching an annualized pace of 1.5 million units thanks to a huge jump (62%) in multifamily projects.

Single-family starts registered a more modest increase, coming in 3.3% higher at an annualized rate of 1.05 million – but despite the December boost, new home construction for the whole year slumped to its slowest pace since 2019.

That was caused in part by prohibitively high mortgage rates, which lingered near the 7% mark for much of the year except for a brief dip at the end of the summer. While developers have offered incentives including mortgage rate buydowns in recent months, customer cancellations are on the up – and building permits, a key indicator of future construction, fell by 0.7% in December.

Still, permits came in slightly higher than expected, at 1.483 million compared to consensus expectations of 1.46 million, with single-family permits increasing 1.6% compared with November.

But First American deputy chief economist Odeta Kushi said the improving outlook for housing starts and higher-than-expected permits aligned with “cautiously optimistic” builder sentiment for 2025.

She said potential interest rate cuts by the Federal Reserve in the year ahead could also provide some relief and contribute to a “modest” rise in single-family starts this year – “but builders know that ‘higher-for-longer’ mortgage rates will keep buyers cautious. Builders will continue to offer incentives like mortgage rate buydowns to bring buyers to the table.”

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