Home construction slipped for the first time in four months in December, with single-family starts taking a hit.
Residential home construction fell 4.3% last month to a 1.46 million annualized rate, according to data from the U.S. Census Bureau. They were up 7.6% from December 2022’s rate of 1.36 million, however.
The dip comes on the heels of a surge in November that sent new construction to a 6-month high. Notably, the decline was driven by single-family construction. Multi-family starts actually rose to a 5-month high.
Permit applications also fared well after performing poorly the month prior. Single-family permits soared to their highest rate since May 2022, and multi-family also ticked up.
Permits offer an indication of future construction, suggesting a wave is likely to hit the market in the new year.
The data offers good news heading into the new year, as many analysts expect the housing market to accelerate in 2024.
Builders are feeling optimistic in January as mortgage rates moderate, improving affordability for Americans struggling to fund a purchase.
“Lower interest rates improved housing affordability conditions this past month, bringing some buyers back into the market after being sidelined in the fall by higher borrowing costs,” NAHB Chairman Alicia Huey noted.
Existing inventory remains tight, incentivizing buyers to turn to new construction. Homebuilders are taking advantage through price reductions and sales incentives, NAHB reported, and buyers are responding. Purchase applications for new homes were up more than 22% in December.
“The low level of existing homes for sale continues to divert prospective buyers to newly built homes,” MBA Deputy Chief Economist and VP Joel Kan commented.
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