December Brings Off-the-Charts Increase in U.S. Housing Starts

  • Housing permits inched up 0.3% to a 903,000 annual rate in December — highest level since July 2008.
  • Single-family permits increased 1.8 % to a 578,000 rate — highest since June 2008. Multifamily permits slipped 2.1% to a still-respectable 325,000 rate.
  • Housing starts jumped 12.1% to a 954,000 rate (highest since June 2008).
  • Single-family starts climbed 8.1% to a 616,000 rate (highest since June 2008); multifamily starts jumped 20.3% to a 338,000 rate (highest since June 2008 as well).
  • Permits were up in the West and Northeast and down in the South and Midwest. Starts were up in all four regions.

Outlook

The housing starts deliver the headline grabbing numbers in December's U.S. Census Bureau Housing Permits and Starts report, but the permits matter more because they are forward looking, and are not affected as much by weather, are better measured and are subject to smaller revisions than the housing starts. Housing permits in December inched up 0.3% to a 903,000 annual rate — highest level since July 2008. Single-family permits — arguably the best gauge of the state of the single-family housing market — increased 1.8% to a 578,000 rate — highest since June 2008. Multifamily permits slipped 2.1% to a still-respectable 325,000 rate. These are not flashy numbers, but they indicate that the housing recovery is ongoing and has steam.

Housing Starts Soar 12.1% in December 2012

Housing starts were off the charts in December. Weather played a role. December 2012 was the 10th warmest December on record for the lower 48 states, dating back to 1895. With demand picking up and inventories of new homes at near record lows, builders took advantage of the mild December temperatures by starting new homes they planned to start at a later date. As a result, we are likely to see payback numbers in January (unless January 2013 is also unusually warm, in which case the plunge would take place later). The 19% jump in permits and 21% jump in starts in the Northeast indicate that Hurricane Sandy also played a role in pumping up the numbers.

December’s report closes the books on housing starts for 2012. By historical standards, it was a miserable year. Builders started 780,000 houses in 2012, the fourth lowest totals since 1945, and completed 651,400 homes, second lowest on record (data start in 1959). But 2012 was also the third straight year of gains for starts and permits, and the year ended on a promising note, with house prices up in most places, household real estate wealth up by more than $1.0 trillion (as of the end of the third quarter), builder optimism at a six-year high and housing permits and starts at four-year highs and looking up.

This year will be better than last for housing starts. Interest rates are rock-bottom low, inventories of new and existing homes are lean, and the economy is creating jobs. Our latest forecast is for starts to rise to 970,000 in 2013.

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