Housing starts jumped 5.8% in December compared with November and were up 5.2% compared with December 2019, according to estimates from the U.S. Census Bureau and U.S. Department of Housing and Urban Development.
Starts of new homes in December were at a seasonally adjusted annual rate of 1.669 million, up from an annual rate of 1.578 million in November.
A majority of the new construction was single-family homes. Starts of new, single-family detached homes were at a rate of 1.338 million, an increase of 12% compared with November. Starts of multifamily properties (five units or more per building) were at a rate of 312,000, a decrease of 15.2% compared with November.
Looking at the past year, about 1.380 million housing units were started in 2020, an increase of 7% compared with 1.255 million in 2019.
Building permits were at a seasonally adjusted annual rate of 1.709 million, an increase of 4.5% compared with November and up 17.3% compared with December 2019.
Permits for single-family homes were at a rate of 1.226 million, an increase of 7.8% compared with November. Permits for multi-family dwellings were at a rate of 437,000, a decrease of 2% compared with previous month.
Housing completions in December were at an annual rate of 1.417 million, an increase of 15.9% compared with the previous month and up 8% compared with a year earlier.
An estimated 1.291 million housing units were completed in 2020 an increase of 2.8% compared with 1.255 million in 2019.
“Builders continue to ramp up construction, offering optimism for single-family housing supply in 2021,” says Odeta Kushi, deputy chief economist for First American, in a statement. “December’s report shows that housing starts for single-family homes are up nearly 28 percent relative to last year, reaching a seasonally adjusted annual rate of 1.338 million units – the highest pace since 2006.
“Another positive indicator is the overall number of permits issued for single-family homes, which can signal how much construction is in the pipeline,” Kushi says. “Single-family permits increased 30 percent relative to last year, and nearly eight percent compared with last month. This is another nod to the expected strength of the housing market in 2021.”
Kushi says the housing market is on solid footing entering 2021.
“Mortgage rates are expected to remain low and millennials will continue to age into their prime home-buying years,” she says. “Finally, the other half of the equation, supply, is beginning to accelerate to keep up with the pace of household formation. However, given the under-building that took place in the decade following the Great Recession, it will take years for builders to close the deficit.”
Builders will continue to be impacted by supply-side headwinds in 2021, Kushi adds.
“In the January survey, builder confidence in the market for single-family homes fell,” she says. “Builders are facing multiple supply-side headwinds, including increasing lumber and material costs and a dearth of affordable lots, which could slow home-building momentum.”
Chuck Fowke, chairman of the National Association of Home Builders (NAHB), says the increase in construction in December may have been due to uncertainty over the future regulatory climate.
“Builder concerns about a changing regulatory landscape may have triggered many to move up their plans to pull permits and put shovels to the ground,” Fowke says in a statement. “Our latest builder sentiment survey suggests somewhat softer numbers ahead due to rising building costs and an uncertain regulatory climate.”
“The 1.34 million single-family starts pace in December is the highest since September 2006,” says Robert Dietz, chief economist for NAHB. “And while NAHB is forecasting further production increases in 2021, the gains will tempered by ongoing supply-side challenges related to material costs and delivery times, a dearth of buildable lots and regional labor shortages that continue to exacerbate affordability woes.”
Austin Niemiec, executive vice president of Rocket Pro TPO, says “with construction continuing at a strong pace, brokers across the country should maintain their focus on purchase and ensure internal processes are solid and ready to support clients looking to secure their dream home.”
“This will be another strong year for loan officers, and new houses will play an important role in making sure we assist buyers at a high level,” Niemiec says.