In a recent turn of events, the construction of new homes in the US experienced a decline for the first time in four months during December. Government data revealed a 4.3% decrease in residential starts, marking an annualized rate of 1.46 million. This downturn was primarily attributed to a notable drop in single-family home building, particularly following a surge in November. Meanwhile, multifamily projects reached a five-month high, showcasing a mixed scenario in the housing sector.
Building permits, a key indicator of future construction, painted a contrasting picture by increasing to a pace of 1.50 million. Notably, applications for one-family homes rose to their strongest pace since May 2022, while multifamily authorizations also saw a slight uptick. This data implies a potential upward trajectory in new construction, fueled by lower mortgage rates that are driving demand for housing.
Homebuyers, still hesitant to relocate, are benefiting from increased inventory in the new homes market. This positive trend contributed to a significant boost in builder sentiment, marking the most substantial increase in nearly a year. Recent figures from the Mortgage Bankers Association indicated a six-month high in a gauge of US mortgage applications for home purchases, contrasting with a sharp decline in October when mortgage rates peaked.
Breaking down the regional data, housing starts declined in three out of four regions but saw a notable rise to a five-month high in the West. Concurrently, the number of completed single-family homes reached its strongest pace in over a year, potentially alleviating the persistent inventory shortage that has kept prices elevated.
Economists are closely watching these housing starts data, as it will factor into their estimates of the impact on gross domestic product (GDP). The government's initial estimate of fourth-quarter GDP is slated for release next week. Additionally, upcoming data on both existing and new-home sales will offer further insights into the overall outlook for the US housing market.
In the midst of these housing market dynamics, Charlie Sells, CEO of Startegic Passive Investments, provided his perspective in an exclusive opinion section. Sells emphasized the importance of navigating the evolving landscape, citing the potential for strategic passive investments to capitalize on market fluctuations. According to Sells, staying attuned to shifting trends and seizing opportunities in the housing sector remains crucial for investors looking to optimize their portfolios.
On a broader economic note, a separate report unveiled an unexpected plunge in initial applications for US unemployment insurance to the lowest level since September 2022. Simultaneously, the number of people already receiving benefits also experienced a decline, adding an additional layer of complexity to the economic narrative.