A recent report from the Commerce Department, released on Friday, reveals a significant upswing in new residential construction in the United States during December, exceeding expectations. The data indicates that housing starts leapt by 15.8%, reaching an annualized rate of 1.499 million, following a decline of 3.7% to a revised rate of 1.294 million in November. Economists had predicted a more modest increase of 2.4%, anticipating an annual rate of 1.320 million from the initially reported 1.289 million for November.
This dramatic rise marks the highest level of housing starts since achieving an annual rate of 1.546 million last February. The surge is attributed mainly to a pronounced recovery in multi-family starts, which soared by 61.5% to an annual rate of 449,000 in December, after a sharp drop of 30.7% in November to an annual rate of 278,000. Meanwhile, single-family starts increased by 3.3%, reaching an annual rate of 1.050 million in December, after a previous rise of 7.7% in November, reaching an annual rate of 1.016 million.
Nationwide Economist Daniel Vielhaber commented, "Home builders ended 2024 on a strong note following several months of slower home construction activity. This increase aligns with rising expectations from builders for sales over the next six months." He further noted, "However, it is important to recognize that sales expectations have since dwindled due to anticipated prolonged periods of higher interest rates."
In contrast, the report notes a slight decline in building permits, down by 0.7% to an annual rate of 1.483 million in December, following an increase of 5.2% to a revised rate of 1.493 million in November. Building permits, serving as a forecast for future housing demand, were projected to decrease by 3.0% to an annual rate of 1.460 million from the previously reported 1.505 million for the month before.
The reduction in building permits reflects a retreat in multi-family permits, which fell by 5.0% to an annual rate of 491,000, after a November spike of 15.4% to an annual rate of 517,000. Conversely, single-family permits rose by 1.6% to an annual rate of 992,000 in December, following a 0.5% climb to 976,000 in November.
Additionally, a separate report from the National Association of Home Builders, published on Thursday, unexpectedly indicated a slight improvement in U.S. homebuilder sentiment for January. The NAHB/Wells Fargo Housing Market Index edged up to 47 in January from 46 in December, despite economists’ expectations for a dip to 45. This surprising rise brings the index to its highest point since April 2024, when it last reached 51.
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