Housing starts were a big beat today.
In December, the pace of housing starts rose 4.4% to an annualized pace of 1.09 million, much higher than the 1.2% increase expected.
Starts also rose to a six and a half year high, meaning there is more housing construction getting off the ground than at any point since 2008.
Housing has lagged behind other US economic indicators that have picked up in recent months, so this is good news for the economy.
In a note following Wednesday’s report, Chris Rupkey at Bank of Tokyo Mitsubishi wrote:
Housing starts rise 4.4% to 1.089 million in December. Up 5.9% in 2013 and now taking on another 5.3% gain in 2014, the slow but steady recovery in housing continues. It looks like a trend. Up trend. The last piece of the economic puzzle is starting to come together now as housing construction, the sector of the economy that collapsed and made the Great Recession great, housing construction is coming back.
But the housing picture isn’t unqualified good news: even as building picks up, it’s still hard to get a mortgage, and young people are strapped with other debt.
There are some headwinds and tailwinds for housing construction. The Millennials have too much student loan debt, wages are stagnant, but on the flip side, in 2014 the most private jobs were created in 18 years, and mortgage rates are 3-5/8% today down from 4.1 to 4.2 per cent in late September. Particularly impressive in today’s report was single family home construction up 7.2% to 728 thousand at an annual rate. This will help put a lot of less-skilled construction workers to work, specialty trade contractors as well. Single-family homes are at a new high for the housing market recovery. Multifamily starts were actually down 4.2% to 339 thousand in December, yet total starts rose to nearly 1.1 million in December.
It’s interesting to note that there’s been a big jump in single family starts and permits, but multifamily — more likely to be in urban areas — is looking sluggish this month.
Multifamily starts were down 4.2% in December from November, and were only up 0.3% from the previous December. Multifamily permits were down more than 11% from November, and 10% from the previous year.
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