By Aarthi Swaminathan
The numbers: Construction on new U.S. homes fell a seasonally adjusted 1.4% in December to 1.38 million, the Commerce Department said Thursday.
The drop in construction on homes followed the decline in November, when housing starts also fell by 1.8%.
Economics polled by the Wall Street Journal expected housing starts to drop to a 1.36 million rate from November’s initial estimate of 1.43 million.
Housing starts are at the lowest level since July 2022.
The annual rate of total housing starts fell from 21.8% from the previous year.
In 2022, America began building 1.55 million homes. That’s 3% less than what started in 2021.
In November, housing starts were revised to a drop of 1.8% of 1.4 million, as compared to a previous drop of 0.5%.
Building permits for new homes fell 1.6% to 1.33 million in December.
Economists had expected building permits to fall to a 1.35 million rate from November’s initial estimate of 1.43 million.
Key details: On an unadjusted basis, housing starts fell 10.7% in December.
The construction pace of single-family homes jumped 11.3% in December but apartments fell 18.9%.
Permits for single-family homes fell 6.5% in December, while permits in buildings with at least five units rose by 7.1%.
Regionally, construction of homes surged in the Northeast.
Single-family construction in the Northeast led the jump with a 96.9% increase. Only the Midwest reported a drop in single-family construction.
Big picture: While rates are dropping and buyers are coming back on board, builders are still feeling gloomy overall about the future.
They’re keen to offload existing inventory, and are scaling back new construction as costs rise.
This is likely to increase the shortage of homes in America.
What are they saying? “Both housing starts and building permit surprised on the upside in December, falling only 1.4% and 1.6%, respectively,” Jefferies economists wrote in a note.
“However, permits are running below starts which is very rare, and suggests construction pipelines are drying up very fast, creating further downside for activity,” they added.
Market reaction: U.S. stocks were set to open higher early Wednesday. The yield on the 10-year Treasury note rose above 3.4%.