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Residential Construction at 14-Year High

Single-family housing starts in December were at a rate of 1,338,000, according to new data released by the U.S. Census Bureau and the Department of Housing and Urban Development. Last month’s rate was 12% above the revised November figure of 1,195,000. Privately-owned housing starts were at a seasonally adjusted annual rate of 1,669,000, which is 5.8% above the revised November estimate of 1,578,000 and 5.2% above the December 2019 rate of 1,587,000.

December’s single-family authorizations were at a rate of 1,226,000, up 7.8% from the revised November figure of 1,137,000. Privately-owned housing units authorized by building permits were at a seasonally adjusted annual rate of 1,709,000, up 4.5% from the revised November rate of 1,635,000 and 17.3% higher than the December 2019 rate of 1,457,000.

Single-family housing completions during December were at a rate of 984,000, a 10.2% increase from the revised November rate of 893,000. Privately-owned housing completions were at a seasonally adjusted annual rate of 1,417,000, 15.9% above the revised November estimate of 1,223,000 and an 8% increase from the December 2019 rate of 1,312,000. An estimated 1,290,600 housing units were completed in 2020, a 2.8% uptick from the 2019 figure of 1,255,100.

Joel Kan’s, Mortgage Bankers Association AVP of Economic and Industry Forecasting, welcomed the news, declaring it provided “much-needed housing supply to a tight market seeing record-low levels of inventory and rapidly rising home prices.” He added that 2020 was “the strongest for residential construction since 2006.”

National Association of Realtors’ Chief Economist Lawrence Yun predicted “the worst of the housing shortage could soon come to an end” observed single-family unit starts outpaced multifamily unit activity.

“Consumers, in light of the pandemic and work-from-home flexibility, have shown a preference for larger-sized homes,” Yun said.

The new data followed the publication of LegalShield’s Housing Construction Index for December, which increased month-over-month from 137.9 to 141.2, its highest level on record. LegalShield’s Housing Sales Index reached an all-time high in December with a 3.1-point uptick to 119.1.

“Millions of Americans who have fared well financially over the last 10 months remain eager to spend more on housing in 2021,” said Jeff Bell, LegalShield CEO. “Many are working from home for the foreseeable future, have been able to save money, and want to improve upon and expand their immediate, daily surroundings.”

However, the National Association of Home Builders (NAHB) reported that its members were not entirely optimistic about the state of their industry. The latest NAHB/Wells Fargo Housing Market Index (HMI) for newly built single-family homes dropped three points this month to 83. All three major HMI indices fell in January: The HMI index gauging current sales conditions was down by two points to 90, the component measuring sales expectations in the next six months dipped two points to 83, and the gauge charting traffic of prospective buyers tumbled by five points to 68.

“Despite robust housing demand and low mortgage rates, buyers are facing a dearth of new homes on the market, which is exacerbating affordability problems,” said NAHB Chairman Chuck Fowke, a custom home builder from Tampa, Fla. “Builders are grappling with 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. They are also concerned about a changing regulatory environment.”

As for homebuyers currently on the prowl for a purchase, mortgage rates ticked downward over the past year. Freddie Mac reported the 30-year fixed-rate mortgage averaged 2.77% for the week ending January 21 while the 15-year fixed-rate mortgage averaged 2.21% and the 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 2.80%.

“Mortgage rates have hovered near historic lows for almost a year, fueling purchase and refinance activity amid a global health crisis,” said Sam Khater, Freddie Mac’s Chief Economist. “We’re now seeing rates fluctuate a bit as political and economic factors drive Treasury yields higher. However, we forecast rates to remain relatively low this year as the Federal Reserve keeps interest rates anchored near zero for a longer period of time, if needed until the economy rebounds.”

 

 

About Author: Phil Hall

Phil Hall is a former United Nations-based reporter for Fairchild Broadcast News, the author of nine books, the host of the award-winning SoundCloud podcast "The Online Movie Show," co-host of the award-winning WAPJ-FM talk show "Nutmeg Chatter" and a writer with credits in The New York Times, New York Daily News, Hartford Courant, Wired, The Hill's Congress Blog and Profit Confidential. His real estate finance writing has been published in the ABA Banking Journal, Secondary Marketing Executive, Servicing Management, MortgageOrb, Progress in Lending, National Mortgage Professional, Mortgage Professional America, Canadian Mortgage Professional, Mortgage Professional News, Mortgage Broker News and HousingWire.
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