Business

U.S. Housing Starts – Permits Accelerate After They Surged in December

Reuters/Inquirer.net Los Angeles / 10:55 AM January 21, 2021

U.S. housing, home building, and permits surged in December as historically low mortgage rates supported the housing market. Still, momentum could slow amid surging lumber prices and a shortage of labor.

Housing starts jumped 5.8% to a seasonally adjusted annual rate of 1.669 million units last month, the Commerce Department said on Thursday. Economists polled by Reuters had forecast starts would rise to a rate of 1.560 million units in December. Homebuilding increased 5.2% on a year-on-year basis. Starts totaled 1.380 million in 2020, up 7.0% from 2019.

Permits for future homebuilding accelerated 4.5% to a rate of 1.709 million units in December. Permits, which typically lead by one to two months, totaled 1.452 million last year, a 4.8% increase from 2019.

Single-family homebuilding, the largest share of the housing market, soared 12.0% to a seasonally adjusted annual rate of 1.338 million units. Single-family starts have increased for eight straight months.

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Housing Market

Though the housing market and manufacturing remain the economy’s star performers, the relentless COVID-19 pandemic is hurting labor availability at construction sites as sick workers stay at home.

A survey on Wednesday showed a dip in confidence among single-family homebuilders in January. Builders complained about “supply-side constraints related to lumber and other material costs, a lack of affordable lots and labor shortages that delay delivery times and put upward pressure on home prices.”

According to data from the Labor Department, softwood lumber prices surged 52.2% on a year-on-year basis in December.

The US Housing Boom continues with starts rising to their highest level since September 2006. pic.twitter.com/kpbwCTPdvB

— Charlie Bilello (@charliebilello) January 21, 2021

The housing market is being underpinned by cheaper mortgages and an exodus from city centers to suburbs and other low-density areas. Companies allow employees to work from home, and schools shift to online classes because of the pandemic. About 23.7% of the labor force is working from home. Lower-wage earners in the services sector have borne the brunt of the coronavirus crisis.

Single-family building permits raced 7.8% to a rate of 1.226 million units in December. Homebuilding is being supported by lean inventories, especially for previously owned homes.

According to data from mortgage finance agency Freddie Mac, the 30-year fixed mortgage rate is around an average of 2.79%. Starts for the volatile multi-family segment tumbled 13.6% to a pace of 331,000 units. Building permits for multi-family housing projects fell 3.0% to a pace of 483,000 units.

Rising rental vacancy rates are a challenge for the multi-family housing market. The pandemic has also seen renters moving away from city centers to suburban apartments, searching for a more outdoor lifestyle.

(Reporting by Lucia Mutikani; Editing by Paul Simao)