US housing starts dip in December but remain strong

Friday 17 January 2014 15.21
US housing starts averaged 1 million in the fourth quarter of the year
US housing starts averaged 1 million in the fourth quarter of the year

US housing starts dived almost 10% in December from a five-year high but maintained robust growth for the year as the housing market recovers, government data has shown.

New residential construction fell to a seasonally adjusted annual rate of 999,900 in December, pulling back from 1.1 million in November, the highest level in five years, the country’s Commerce Department reported.

The December starts number was better than expected. 

Analysts on average had forecast a steeper decline to 986,000. 

"The month-to-month decline of 9.8% doesn't quite reverse the strong November gain," said Celia Chen of Moody's Analytics. "Winter storms may have caused some of the retrenchment."

In the fourth quarter, starts averaged 1 million, compared with 882,000 in the third quarter.  

"Through the volatility, starts appear to be trending up again after some stalling a few months ago, but to be confident of that we would like to see further gains in the housing market index and home sales," said Jim O'Sullivan of High Frequency Economics.

Building permits, a sign of potential future housing construction, fell 3% from November to an annual rate of 986,000, the Commerce Department said. 

The reading came in weaker than the 1,000 estimate.

On a year-over-year basis, December housing starts were up 1.6% and building permits were up 4.6%.

The full year 2013 data underlined the strength of last year's housing market recovery following the 2006 collapse of a price bubble.

The department estimated there were 923,400 starts in 2013, the strongest pace since 2007 and 18.3% higher than in 2012.

Building permits at 974,700 were also at a six-year high and up 17.5% from 2012.

Chen noted that inventories of new homes and existing homes on the market remained low.

"This lack of supply will support a surge in homebuilding this year and next, which in turn will help ignite a broader economic recovery," Chen said.

"Uncertainty over fiscal conditions has eased substantially and job gains will step up, which will drive demand for homes."