Housing starts fell 11.2% in December compared with November to an adjusted annual rate of 1.078 million, according to the U.S. Census Bureau and U.S. Department of Housing and Urban Development.
That’s down 10.9% compared with about 1.210 million in December 2017.
Starts of single‐family homes were at an annual rate of about 758,000, a decrease of 6.7% compared with about 812,000 in November.
Starts of multifamily homes (five units or more per building) were at a rate of about 302,000, down 22.0% compared with 387,000 in November.
Regionally, combined single-family and multifamily housing starts fell 26.3% in the West, 13.2% in the Midwest and 6% in the South, but were flat in the Northeast.
The drop in housing starts in December is in keeping with seasonal cycles: home construction generally slows during the winter months.
For 2018, an estimated 1.246 million housing units were started, an increase of 3.6% compared with about 1.203 million in 2017.
Although housing starts dropped, building permits were up. They were buoyed by a 17.1% increase in the West. However, they were down 17.6% in the Midwest; 6% in the Northeast; and 2% in the South.
As a result of that increase in the West, permits increased overall by 0.3% in December compared with the previous month to an annual rate of 1.326 million.
That’s an increase of 0.5% compared with a year earlier when the rate was about 1.320 million.
Permits for single‐family homes were at a rate of 829,000, an increase of 2.2% compared with about 848,000 in November.
Permits for multifamily dwellings were at a rate of 460,000, an increase of 5.7% compared with about 435,000 in November.
In 2018, an estimated 1.310 million housing units were authorized by building permits, an increase of 2.2% compared with about 1.282 million in 2017.
Greg Ugalde, chairman of the National Association of Home Builders (NAHB), notes that the slowdown in housing starts in December coincided with an increase in mortgage rates and a drop in home builder sentiment.
“During that time, builders adopted a cautious wait-and-see approach as demonstrated in the rise of single-family and multifamily units that were permitted but not under construction,” Ugalde says in a statement.
Robert Dietz, chief economist for NAHB, says he expects single-family housing production to be “relatively flat in 2019 and multifamily starts will level off as well.”
“The biggest challenge facing builders this year will be ongoing housing affordability concerns as they continue to grapple with a shortage of construction workers, a lack of buildable lots and excessive regulatory burdens,” Dietz adds.