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Highlights
Housing may be gaining forward momentum but adverse weather appears to have delayed groundbreaking. For the latest month, starts declined while permits strengthened. Housing starts in December slipped back 4.3 percent, following a 3.8 percent rebound in November. The December annualized pace of 0.529 million units fell short of the median forecast for 0.550 million units and is down 8.2 percent on a year-ago basis. The reversal in December was led by a 9.0 percent drop in single-family starts, following a 5.8 percent gain the month before. The multifamily component rebounded 17.9 percent after declining 5.0 percent in November.
By region, declines were seen in the Midwest, down 38.4; the Northeast, down 24.7; and South, down 2.2 percent. The sharp weakness in the Midwest and Northeast indicates that snow storms played a role in damping starts. For the West, starts jumped 45.8 percent.
Housing permits, in contrast, made a 16.7 percent comeback in December after declining 1.4 percent in November. Overall permits posted at an annualized rate of 0.635 million units and are down 6.8 percent on a year-ago basis. The latest boost was led by the multifamily component which was up a sharp 53.5 percent while single-family permits improved 5.5 percent.
The gain in permits may be a significant positive as it in part reflects optimism of homebuilders. December starts were relatively weak and this likely was due to atypically adverse weather for the month. Permits are much less affected by weather as homebuilders simply fill out paperwork indoors while starts depend on whether bulldozers and workers have good weather to operate. However, the Commerce Department noted that building code changes took effect on January 1 in California, Pennsylvania and New York. In turn, some of the multifamily strength likely is due to construction companies getting approval before the tighter regulations.
Today's report should be seen as a positive despite starts falling short of expectations. The big issue going forward is whether homebuilder optimism is confirmed by gains in home sales. If sales stay flat, starts will ease. But meanwhile, homebuilders have reason to be cautious and the boost in permits should be seen in that context. Optimism is up but more toward multifamily than single-family.
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Market Consensus before announcement
Housing starts in November rebounded 3.9 percent, following a sharp 11.1 percent drop the prior month. The November annualized pace of 0.555 million units is down 5.8 percent on a year-ago basis. In October, the multifamily component had fallen sharply and analysts had expected that component to lead a November rebound in overall starts. Instead, the gain in November was led by a monthly 6.9 percent boost in single-family starts, following a 2.7 percent dip the month before. But there is little to no forward momentum for notable improvement. Overall permits, however, fell back 4.0 percent in November after edging up 0.9 percent in October.
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