U.S. Housing Starts Drop Sharply at the End of 2017

U.S. housing starts fell sharply in December, but still capped a solid year of new single-family home construction.

Housing starts fell 8.2% in December from a month earlier to a seasonally adjusted annual rate of 1.19 million, the Commerce Department said Thursday. Residential permits, which can signal how much construction is queued up, also fell, dropping 0.1% to an annual pace of 1.30 million last month.

Economists surveyed by The Wall Street Journal had expected housing starts to decline 1.5% and permits to decrease 0.8%.

Last month's housing starts' decline appears to be driven by drops in housing starts in all four major U.S. regions, with starts in the Northeast dropping to the lowest level since May 2017.

Still, housing-starts data can be volatile from month to month and can be subject to large revisions. Looking past monthly volatility, starts were up 2.4% in 2017 when compared to 2016, and permits increased 4.7% in the same period, signaling solid construction in 2017 that coincided with rising demand that has pushed up prices.

For single-family homes, housing starts fell 11.8% in December from a month earlier and increased 1.4% for buildings with multiple units, like triplexes and apartments. Meanwhile, permits for single-family homes increased 1.8% from a month earlier and declined -3.9% for multifamily buildings.

New residential construction hit a postrecession high in October 2016 but has trended lower since as multifamily construction has declined. It remains far below the levels reached during the years leading up to the 2008 financial crisis.

Labor shortages, rising land costs and increasingly restrictive land-use regulations have helped create a shortage of inventory that is driving up home prices much more quickly than wages and inflation.

Still, home builders are feeling upbeat about the housing market. The National Association of Home Builders' Housing Market Index, which gauges home builder sentiment about the market for single-family homes, fell in January, but remained near an 18-year high.

The Commerce report can be found at http://www.census.gov/construction/nrc/pdf/newresconst.pdf

Write to Sharon Nunn at sharon.nunn@wsj.com and Sarah Chaney at sarah.chaney@wsj.com.

(END) Dow Jones Newswires

January 18, 2018 08:45 ET (13:45 GMT)