U.S. Housing Starts and Permits (December 2019)

Housing starts close the year with a bang

• U.S. housing starts rose by an impressive 16.9% to 1.608 million units (annualized) in December from an upwardly revised 1.375 million units in November. The market expected a much more staid increase of 1.1%.
• The increase was broad-based, with both single and multi-family starts coming in higher. Single-family starts rose by 11.2% to 1.055 million units, while the more volatile multi-family segment posted an even larger 29.8% gain to 553k.
• Permits on the other hand retreated 3.9% in December to 1.416 million. Multi-family permits pulled back by 9.6%, following a modest uptick of 0.5% the previous month, while single-family permits were down marginally by 0.5%.
• The regional outturn was decidedly on the positive side, with the Midwest the most pronounced (up 37.3%). This was followed by increases in the Northeast (25.5%), the West (19.8%) and the South (9.3%).

Key Implications

• Today's headline print on housing starts is certainly a good number, beating consensus and delivering gains in both single and multi-family segments of the market. The level of starts has risen to the highest in 13 years, while the month-over-month gain was the largest in three years – so overall, a solid outturn to end a volatile year. The uptick is good news for future housing inventory, which has been hovering around historically low levels.
• The full year gain in starts was a bit more subdued, with starts rising 3.2% for the year, following a 3.9% increase in 2018. Permits were up 3.9% for the year.
• The strong reading suggests that residential activity has some momentum heading into the New Year, supported by low mortgage rates, a solid labor market and an optimistic outlook among builders, whose confidence posted the highest back-to-back reading in December and January since 1999.

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