Housing construction slid again in December to its lowest point since July, but an increase in single-family starts may signal improvement to come.
Residential starts fell 1.4% from November to an annualized rate of 1.38 million, down 21.8% from the same time last year, according to data from the U.S. Census Bureau.
This is the fourth consecutive decline for these data. It was driven largely by a dip in multifamily construction, which is volatile month to month.
The picture for all of 2022 was fairly bleak. In the entire year, only 1 million homes were started, down 10.6% from 2021 and the largest drop since 2009.
Permits for new homes fell 1.6% to a rate of 1.33 million. Single-family permits tanked by 6.5% to their slowest pace since early 2020.
Permits offer an indication of how many homes will be built in the coming months. The data suggest an even tougher market on the horizon.
But some good news came from the release. Economists surveyed by Bloomberg predicted starts would fall to 1.36 million, but December fared slightly better.
Single-family starts in fact rose by 11.3% to a 909,000 annualized rate, their highest since August.
Builder confidence ticked up in December, breaking a twelve-month streak of declines, thanks to retreating interest rates.
“While NAHB is forecasting a decline for single-family starts this year compared to 2022, it appears a turning point for housing lies ahead,” said National Association of Home Builders Chief Economist Robert Dietz.
“In the coming quarters, single-family home building will rise off of cycle lows as mortgage rates are expected to trend lower and boost housing affordability. Improved housing affordability will increase housing demand, as the nation grapples with a structural housing deficit of 1.5 million units.”
Mortgage rates fell to 6.23% last week.
Though experts are careful to warn that volatility is likely in 2023, some say rates have likely peaked and should drop further. The Mortgage Bankers Association expects rates to finish the year at 5.2%.
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