U.S. housing starts rise strongly in December; single family homes demand to continue to rise

Housing starts pace in the U.S. recovered in December. It rose by 124k units to 1,226k in the month. The headline figure was stronger than market projections that called a 1,188k print. The anticipated rebound follows the previous month’s huge decline that was upwardly revised to 1,102k units.

The total gain was focused in the volatile multifamily segment, reversing nearly all of November month’s loss. The rate of single-family construction continued decelerate in December, which dropped 33k.

Building permits in December came in a tad below projections, falling by 2000 to 1210k from an upwardly revised 1212k print in November. Meanwhile, single-family permits were up for the fifth straight month to the most rapid rate in more than four years.

On the contrary, the multi-family segment dropped by 39 k units to the lowest level since April. The sequential decline was greatly widespread region wise. Except for the South, which registered a fall of 8000 units, gains were recorded in the West, Northeast and Midwest.

Following a sharp decline in November, housing starts recovered by more than projected in December, underlining the volatility in the headline figure. Looking at 2016 as a whole, the housing starts improved in the year, averaging 1168k units, rising 60k units from the 2015.

The rate of construction in the final quarter of 2016 came in stronger, averaging 1216k units. Single-family permitting activity was the main star of the report. It implies that construction activity in the segment should rebound in the months ahead.

Overall, the housing market continues to be underpinned by robust underlying fundamentals. Single family demand homes are expected to keep on rising along with a tighter labor market, increasing wages and a recovery in household formation, noted TD Economics in a research report.

“While the recent spike in rates poses some downside risk to our outlook for housing demand and construction, these factors should provide enough of an offset to keep homebuilding on a positive course”, added TD Economics.

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