US housing starts reach highest level in 13 years after ‘spectacular’ December surge
US housing starts spiked 16.9% in December to their highest level in 13 years, according to a Friday release from the Census Bureau.
The seasonally adjusted annual rate for housing starts reached 1.61 million last month, its highest point since December 2006. The positive data suggests a continued recovery in the US housing market amid low mortgage rates, historically low unemployment levels, and robust consumer confidence.
Total housing starts landed well above the November figure of 1.375 million and estimates from economists surveyed by Bloomberg. The median forecast called for construction starts to reach a pace of 1.38 million, and the highest analyst estimate of 1.48 million was still dwarfed by the Friday figure.
Single-family-home construction jumped 11.2% to its highest level since 2007. Multifamily-home builds, which include apartment complexes and condos, soared 29.8% to the highest since 1986.
Housing permits, a popular forward-looking indicator for the sector, fell through the month by 3.9%, to 1.42 million.
The popular iShares US Home Construction exchange-traded fund, which tracks homebuilders’ stocks, traded as much as 1% higher on Friday morning.
The double-digit gain had some analysts fearing a sharp correction in January’s data. The latest data is “spectacular but clearly unsustainable,” Ian Shepherdson, the chief economist at Pantheon Macroeconomics, wrote in a Friday note.
“Activity can’t be sustained at this level, and a hefty correction in January is a good bet,” the economist wrote. “The permits numbers are a better guide to the underlying picture because they are much less weather-sensitive, and the December numbers are a bit disappointing.”
Even if the next release doesn’t maintain December’s breakneck pace, the trend “has been favorable even before the December jump,” and activity is likely to stay positive, the JPMorgan Chase economist Daniel Silver wrote. The economist cited the decline in mortgage rates and broader trend of housing-market recovery for his January projection.
The January report is scheduled to be released on February 19.