WASHINGTON – U.S. housing starts rose 11.3% in December to a seasonally adjusted annual rate of 1.23 million, posting their highest level in nine years in 2016, the Commerce Department announced Thursday. Analysts had expected 1.2 million.
Permits, an indication of how much construction is in the pipeline, were down .2% to 1.21 million.
The rise in starts follows a drop in activity in November, when new starts dropped by a revised 16.5%. The drop was largely driven by a 38.7% drop in the construction of buildings with two or more units, which includes apartments and condos.
Single-family housing starts dropped 4% in December while multifamily rebounded 53.9% from a month earlier.
An estimated 1.17 million housing units were started in 2016, nearly 5% more than were started in 2015, marking the strongest year since 2007. However, the increase belies a sharp deviation in the types of residential construction under way. Single-family starts were up 9.3% last year, but construction of buildings with five or more units fell 3.1%. A similar pattern was seen in the permits data.
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New home construction has been the weakest element of the overall housing recovery. Home prices have already surpassed their previous highs and apartment rents have climbed more than 26% since early 2010.
The strength of multifamily housing construction has helped bolster housing starts, even as single-family activity remains well below normal levels.
U.S. builders remain highly confident about the market for newly built single-family homes, but their optimism slipped in January from the highest level in more than a decade the prior month, according to the National Association of Home Builders (NAHB). In a separate report released Wednesday, the NAHB/Wells Fargo Housing Market Index dipped to 67 in January after jumping to 69 in December.
“NAHB expects solid 10% growth in single-family construction in 2017, adding to the gains of 2016,” says NAHB Chief Economist Robert Dietz. “Concerns going into the year include rising mortgage interest rates as well as a lack of lots and access to labor.”
