December 2018 Residential Permits, Starts and Completions

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Builders started construction of privately-owned housing units in December at a seasonally adjusted annual rate (SAAR) of 1,078,000 units (1.256 million expected). This is 11.2 percent (±14.0 percent)* below the revised November estimate of 1,214,000 (originally 1.256 million units) and 10.9 percent (±16.1 percent)* below the December 2017 rate of 1,210,000 units; the not-seasonally adjusted YoY change (shown in the table above) was -11.9%.

Single-family housing starts were at a SAAR of 758,000; this is 6.7 percent (±15.3 percent)* below the revised November figure of 812,000 (-11.1% YoY). Multi-family starts: 320,000 units (-20.4% MoM; -13.7% YoY). An estimated 1,246,600 housing units were started in 2018. This is 3.6 percent (±2.1%) above the 2017 figure of 1,203,000.

* 90% confidence interval (CI) is not statistically different from zero. The Census Bureau does not publish CIs for the entire multi-unit category. 

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Completions in December were at a SAAR of 1,097,000. This is 2.7 percent (±10.0 percent)* below the revised November estimate of 1,128,000 and 8.4 percent (±12.2 percent)* below the December 2017 SAAR of 1,197,000 units; the NSA comparison: -8.6% YoY.

Single-family housing completions were at a SAAR of 790,000; this is 0.1 percent (±14.0 percent)* above the revised November rate of 789,000 (-6.3% YoY). Multi-family completions: 307,000 units (-9.4% MoM; -14.5% YoY). An estimated 1,191,700 housing units were completed in 2018. This is 3.4 percent (±3.8%) above the 2017 figure of 1,152,900. 

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Total permits were at a SAAR of 1,326,000 units (1.297 million expected). This is 0.3 percent (±1.2 percent)* above the revised November rate of 1,322,000 (originally 1.328 million units) and 0.5 percent (±1.1 percent)* above the December 2017 rate of 1,320,000 units; the NSA comparison: +0.6% YoY.

Single-family permits were at a SAAR of 829,000; this is 2.2 percent (±0.7 percent) below the revised November figure of 848,000 (-5.5% YoY). Multi-family: 497,000 (+4.9% MoM; +9.7% YoY). An estimated 1,310,700 housing units were authorized by building permits in 2018. This is 2.2 percent (±0.6%) above the 2017 figure of 1,282,000. 

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Builder confidence in the market for newly-built single-family homes rose four points to 62 in February, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

“Ongoing reduction in mortgage rates in recent weeks coupled with continued strength in the job market are helping to fuel builder sentiment,” said NAHB Chairman Randy Noel. “In the aftermath of the fall slowdown, many builders are reporting positive expectations for the spring selling season.”

February marked the second consecutive month in which all the HMI indices posted gains. The index measuring current sales conditions rose three points to 67, the component gauging expectations in the next six months increased five points to 68 and the metric charting buyer traffic moved up four points to 48.

“Builder confidence levels moved up in tandem with growing consumer confidence and falling interest rates,” said NAHB Chief Economist Robert Dietz. “The five-point jump on the six-month sales expectation for the HMI is due to mortgage interest rates dropping from about 5 percent in November to 4.4 percent this week. However, affordability remains a critical issue. Rising costs stemming from excessive regulations, a dearth of buildable lots, a persistent labor shortage and tariffs on lumber and other key building materials continue to make it increasingly difficult to produce housing at affordable price points.”

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.