January 23, 2020
U.S. housing starts jumped 16.9 percent in December 2019, compared to November, putting the seasonally-adjusted annual rate of starts at 1.608 million units. The last time the country saw a higher housing-start rate was thirteen years ago, in December 2006. Single-family-home starts jumped 11.2 percent to 1.055 million, marking an annualized rate last topped in June 2007, just before the housing-market unraveling that sparked the Great Recession of 2007-2009.
All regions of the U.S. experienced growth in December, led by the Midwest, which saw its housing starts jump 37.3 percent to 810 thousand (accounting for 16 percent of total U.S. housing starts). The number of starts in the Northeast climbed 25.5 percent to 133 thousand (18 percent of total starts). The West saw a 19.8 percent increase to 411 thousand (26 percent of all starts). The South - the only region failing to achieve double-digit growth in new home starts – experienced 9.3 percent growth to 810 thousand units (50 percent of the U.S. total).
For the year, housing starts across the U.S. totaled 1.29 million units, marking an increase of 3.2 percent over 2018. The peak rate of expansion occurred in January 1972, when 2.49 million units were started. April 2009 marked the country’s record-low rate of growth, when the seasonally-adjusted annualized rate was fewer than half a million new units.
Unseasonably warm weather likely contributed to the big December jump. Additionally, interest rates remain accommodatingly low. Whereas the average 30-year fixed-rate home loan issued in late 2018 charged 5 percent interest, today’s rates once again hover near 4 percent – a rate last seen, albeit briefly, in the third quarter of 2017. Not surprisingly, sentiment among U.S. homebuilders also spiked in December, reaching a level last topped in 1999.
While the housing market in the U.S. is clearly benefitting from a number of favorable conditions and trends, home affordability remains a growing concern. The median price paid for single-family homes in the U.S. hit $274,500 in December – up 7.8 percent versus year-ago. Summarizing the predicament, Robert Dietz, the National Association of Home Builders’ Chief Economist, said in a statement, “While we are seeing near-term positive market conditions with a 50-year low for the unemployment rate and increased wage growth, we are still underbuilding due to supply-side constraints like labor and land availability. Higher development costs are hurting affordability.”
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