U.S. homebuilding activity disappoints in December 2017, but likely to pick-up gradually
Source: FxWire Pro - Commentary / 18 Jan 2018 22:11:50 Eastern Standard Time
Homebuilding activity in the U.S. moderated in the month of December. Housing starts recorded a measly 1,192k at an annualized rate, marking a drop of 107k from the slightly upwardly revised November print. The headline came in below market projections of a slight moderation to 1275k. On the contrary, building permits surprised to the upside, coming in at 1,302k in December.
Single family starts mainly drove the overall decline, falling 112k to 836k, from an upwardly revised November reading of 18k. The more volatile multifamily segments saw building tick by 5k to 356k from a downwardly revised November print. Single family permits rose for the fourth straight month, to sound 881k. Multi-family permits dropped to 421k.
Region wise, the South was major drag on the headline figure after November set a post-recession record for single-family starts. The other regions recorded modest pullbacks in activity in the 3 to 4k range.
For 2017 as a whole, starts averaged 1207k, a rise of 30k from 2016 levels as gains in single family homebuilding more than countered the decline in multifamily units. Permits also rose last year, increasing 51k to 1258k.
The setback in today’s report seems to be more of a blip in homebuilding activity rather than a start of a new trend lower, noted TD Economics in a research report. The decline comes after two solid months that were partially stimulated by previous delays resulting from hurricane activity.
Furthermore, housing construction in December was probably hindered by heavy snowfall while an overarching scarcity of construction workers hangs over the market. In spite of these factors, homebuilding is expected to pick up, although very gradually, underpinned by single family homebuilding.
“Looking ahead, a shrinking pool of construction workers will be the biggest barrier to homebuilding in 2018, while rising mortgage rates and home prices will add further downward pressure”, added TD Economics.
In spite of this, a sound labor market and accelerating wages would underpin demand, while tight inventories and increasing prices would incentivize new home building. As such, residential investment is expected to rise in 2018, driven especially by strength in the single family segment, stated TD Economics.
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