The housing construction market continued its strength in December with starts vaulting 5.8 percent from November to a seasonally adjusted annual rate of 1,669,000. Single-family housing starts soared 12 percent, but starts of multifamily housing of five units or more plummeted 15.2 percent.
Building permits, an indicator of future construction, rose 4.5 percent last month to a SAAR of 1,709,000. Single-family permit authorizations continued to outpace multifamily, gaining 7.8 percent from November. Multifamily housing permits slipped 2.0 percent.
Regionally, starts surged in the Midwest (32.1 percent), West (10.2 percent), and South (5.5 percent), but plunged 34.8 percent in the Northeast. Permit authorizations followed a similar trend with only the Northeast posting a decline, down 7.2 percent.
Starts and permit authorizations in 2020 increased by 7.0 percent and 4.8 percent, respectively, from the previous year.
The strength of the market correlates with healthy builder confidence. The NAHB/Wells Fargo Housing Market Index (HMI) registered a robust 83 in January, although slipping three points from December. The index measures builder perception of current and future sales of single-family homes for the next six months as well as rating traffic of prospective buyers.
Higher raw material prices, including a surge in lumber prices, and concern over rising COVID-19 infections impacted builder confidence in January.
“Housing affordability also faces rising challenges given home price gains and a lack of inventory,” said Robert Dietz, chief economist at the National Association of Home Builders. “Builders are grappling with supply-side constraints related to lumber and other material costs, a lack of affordable lots and labor shortages that delay delivery times and put upward pressure on home prices.”
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