Homebuilders broke ground on new projects and made plans for future construction at a faster pace than expected in December, the latest sign that the economy ended 2023 on a footing that may be too strong to justify rate cuts early this year.
Housing starts, a broad measure of new construction of residential construction, were up 7.6 percent compared with a year ago to a seasonally adjusted annual pace of 1.460 million houses, the Department of Commerce said on Thursday. Single-family starts were up 15.8 from December of last year to a seasonally adjusted annual pace of 1.027 million.
Compared with the prior month, the pace of construction slowed. Overall starts fell 4.3 percent from the November pace and single-family starts declined 8.6 percent.
Construction of apartments fell 9.5 percent from a year ago to a seasonally adjusted annual rate of 417,000 units. Compared with November, however, multifamily starts rose 7.5 percent.
There were downward revisions to the estimates for October and November.
Single-family starts initially crashed when the pandemic struck, as construction was shutdown in many places. A it became clear that many families were shifting out of urban centers during the pandemic to avoid disease—as well as rising crime, resurgent homelessness, anti-police riots and far-left politics, and worsening urban blight—and take advantage of remote working opportunities, single-family construction soared to levels not seen since 2006, when the housing bubble was in full-swing.
Single-family starts declined when the Fed started raising rates and were weak for 2022 and the early months of 2022. They have since recovered to above prepandemic levels. Even with the month-to-month decline, the December 2023 housing starts outpaced December 2019’s—then the fastest pace of single-family construction since 2006.
Permits to start homes rose in December, suggesting optimism among builders. Single-family permit applications have been up for 11 straight months and are now above their prepandemic peak.