Housing Starts fell for the first time in four months in December, down 4.3% from November. While single-family Starts also saw a downtick from November, they still had a “solid showing” per the NAHB as they surpassed the million mark (1.027 million) for the second straight month. This reflects the number of single-family homes that would be built throughout the year if construction took place at the same rate in every month as it did in December. Building Permits, which are an indication of future construction, were up 1.9% from November to December, with permits for single-family homes reaching their highest level in a year.
What’s the bottom line? “Mortgage rates steadily fell below 7% in December, and lower rates combined with a lack of existing inventory in most markets helped to keep single-family production above a one million-unit annual pace,” explained NAHB Chair Alicia Huey. “And the fact that our latest surveys showed a big increase in builder confidence is an indicator that we can expect housing starts to improve in the coming months.”
A boost in supply will be welcome news for buyers around the country who have struggled with low inventory, though there is still a long way to go to meet the level of demand that exists among buyers. When we consider the pace of completed homes that will be coming to market (around 1.57 million homes annualized) and subtract roughly 100,000 homes that need to be replaced every year due to aging, we’re well below demand as measured by household formations that are trending at 1.9 million. More demand than supply will continue to be supportive of home values, especially when we reach the busier spring homebuying season.