December Housing Starts Tumble to 27-Month Low

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Home building activity, measured by housing permits and starts DETERIORATED in December, as housing starts fell and single-family permit activity collapsed;
  • The seasonally adjusted annual rate of housing starts FELL 11.2 percent with single-family starts DOWN 6.7 percent and multi-family starts DROPPING 20.4 percent; Total starts fell to a Seasonally Adjusted Annualized Rate (SAAR) of 1.078 million, the weakest since September 2016.
  • Permit activity ROSE a scant 0.3 percent, though permits for single-family homes SKIDDED 2.2 percentage; multi-family permits ROSE 4.9 percent;
  • The rate of housing completions FELL 8.4 percent, though single-family completions FELL 5.4 percent from October while multi-family completions ROSE 17.2 percent.

Trends:

  • Single-family permits represented 62.5 percent of all permit activity, the smallest share since August 2017 (61.8 percent);
  • The drop in housing completions was the largest since March 2015 (12.1 percent);
  • Single-family starts fell to the lowest level since May 2017.

Data Source: Census Bureau and Department of Housing and Urban Development

Image result for housing starts

Even as builder confidence (the National Association of Home Builders Housing Market Index) improves, the data behind it continued to struggle in the latest numbers from the Census Bureau and Department of Housing and Urban Development, albeit for December, suggest.

To say that housing is sluggish based on construction reports and home sales information, would be an understatement. Those numbers though don’t explain the record number of construction job openings as tallied by the Bureau of Labor Statistics.

Clearly there’s more going on here.

We may get a better sense of who is in and out of the housing market in Thursday’s quarterly report on homeownership which, among other things, details homeownership by age. The contention has been the 25-34 year old age cohort is not buying homes at the same pace their parents did. Data Thursday will either bear that out of send analysts in search of a different explanation.

Suffice it to say, the numbers for housing construction (and sales) don’t look good but then again, the numbers are somewhat out of synch. The Census-HUD report on housing permits, starts and completion issued this month should have been for January, not for December. We’re sort of driving trying to see through a mud-splattered windshield as a result of the 35-day partial government shutdown.

It will probably take a month or two for the government numbers to catch up with what is actually happening in the economy, in time for new factors to kick in.

Hear Mark Lieberman every Friday at 6:20 am on POTUS Morning Briefing, Sirius-XM 124. You can follow him on Twitter at @foxeconomics.

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