New housing construction increased more than expected in December amid a rebound in multifamily units, according to the Commerce Department.
Housing starts rose by 11.3% at a seasonally adjusted annual rate of 1.226 million, a report released Thursday showed. Building permits fell 0.2% at a rate of 1.21 million.
Economists had forecast that housing starts rose by 9% at a seasonally adjusted annual rate of 1.188 million, according to Bloomberg. They estimated that building permits rose by 1.1% at a rate of 1.225 million.
In November, home groundbreakings pulled back from the nine-year high hit in the prior month. Starts slowed the most — by more than half — in the Northeast and in multifamily buildings with five or more units.
The multifamily segment rebounded in December, while single-family starts were slightly lower.
“For the year as a whole, housing starts of 1.17 million units were the strongest since 2007 as home builders try to keep up with rising demand — pushed up by low (if rising) mortgage rates, solid job growth, rising wages, and faster household formations (especially from millennials),” said David Berson, chief economist at Nationwide, in a note.
“Even with stronger home construction in recent years, more increases in the supply of new homes will be needed to balance out the market, reflected in rapid house price appreciation in recent years.”