New home construction slowed les than expected in December, following a surge in November, and ended the year far stronger than the summer months, according to a report Friday from Washington.
New Housing Starts Down Almost 10 Percent, Weather Most-Likely Culprit
The Commerce Department said that groundbreaking for new houses declined 9.8 percent to a seasonally adjusted annual rate of 999,000 in December, after jumping to a revised six-year high of 1.107 million (up from 1.091 million) homes the month prior. Economists predicted the annual rate to drop to 975,000 starts for December.
Economists say that unseasonably harsh winter weather in December put a chill on home building. A 33.5- percent drop in housing starts in the Midwest exemplifies this, as the region was hit particularly hard by snow and ice last month.
The annualized rate for December was still the third-highest pace for 2013, trailing only November and March (1.005 million). During June, July and August, a time when interest rates were increasing, housing starts averaged only an 866,000 annual rate.
Starts on single-family homes, the largest and less volatile portion of new starts, declined 7.0 percent in December to an annual rate of 667,000. Outside of November, that’s the best rate since May 2008.
Multi-family starts, such as apartments, fell 14.9 percent to 332,000. Multi-family construction is known to provide volatile swings from month-to-month.
2013 Still Best Year Since 2007
For the complete 2013 year, housing starts advanced 18.3 percent to 923,400 units from 780,600 in 2012, representing the best year-over-year climb since 2007 (nearly 1.4 million), right before the markets collapsed. After bottoming in 2009, starts have improved consecutively in each year.
Applications for building permits, regarded as a barometer of future building, slipped 3.0 percent in December to a 986,000 annual rate, anchored by a 4.8-percent decline in permits for single-family homes. Building permits in November stood at a 1.02 million rate, which was lower than the 1.04 million rate registered in October.
On Thursday, The National Association of Home Builders/Wells Fargo Housing Market Index (often called the “builder sentiment index”) for January edged down to 56 from 57 in December. Still, though, a reading above 50 indicates that more builders perceive housing conditions to be good, rather than bad.
“Rising home prices, historically low mortgage rates and significant pent-up demand will drive a continuing, gradual recovery in the year ahead,” said NAHB Chief Economist David Crowe in a statement yesterday. Crow also noted that the market could be even strong if it weren’t for rising construction costs and inaccurate appraisals that stop loans from being approved.
The NAHB forecasts that new single-family home construction with rise to 820,000 units in 2014. It also predicts new multi-family units to total 326,000 this year.