Single family housing starts inched up in December, ending an otherwise dour latter half of the year for housing on an upbeat note, according to the Monthly New Residential Construction Report released this week.
Single-family housing starts clocked in at a rate of 1.05M in December, a full 3.3% above the revised November figures and only 2.6% down from the year prior. Overall housing starts, meanwhile, increased 15.8% from the month prior to a rate of 1.50M units in December, the highest since February 2024.
These numbers were largely boosted by starts in the multi-family sector, which saw a staggering 61.5% increase after suffering multiple consecutive months of drag.
In total, 2024 saw a 3.9% decline in housing starts (down to 1.36M) compared to the year prior. Single family starts totaled 1.01M, rising 6.5% from 2023, while multifamily ended the year down 25% from last.
Looking at regional data for 2024, combined single-family and multifamily starts were 9.1% higher in the Northeast, 0.1% lower in the Midwest, 5.2% lower in the South and 7.7% lower in the West.
Lightapalooza took place in late February, and the growth of the event has mirrored the rapid ascension lighting fixtures and controls.
According to the NAHB, custom homes, which many integrators work on, maintained a solid pace throughout the year, highlighting a resiliency in this segment due to its concentration in higher-end markets.
Despite the bump in housing inventory, it has done little to thaw the frigid sales environment that currently exist. According to Redfin, roughly 40,000 home purchases were called off in December, representing 16% of all homes that had been under contract, marking it as the highest rate on record.
Pending home sales across the board sagged 4.5% in December with mortgage rates jumping to the highest-level months. According to Freddie Mac, mortgage rates nearing the end of December clocked in at 6.85%. Since then, rates have only continued to climb, sitting now at 7.04% at the time of writing.
The recent uptick in mortgage rates is due in part to the Federal Reserve projecting fewer interest rate cuts in 2025 than anticipated.
Despite this, December accounted for the highest number of home sales within the past two years, rising 9.3% YoY, with existing homes comprising most of the sales.
Despite the ongoing risks and challenges, the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) showed that builders remain cautiously optimistic about the housing market.
The gauge on current sales conditions edged up three points to 51 as of the most recent index, while the gauge measuring prospective buyer traffic rose two points to 33. Sales expectations, however, fell six points to 60 largely due to elevated rates. For reference, any gauge over 50 indicates more builders views conditions as good vs. poor.
A major factor hampering housing affordability continues to be the lack of inventory as home supply shrank in December to 2.5 months. Despite sales still coming in as far lower than in previous years, demand remains high, leading to elevated mortgage rates and home values, with the median sales price of a home up 6.3% YoY in December.
The homebuilding industry overall agrees that an increase in housing supply will lead to an increase in affordability. However, challenges that include a continued lack of buildable lots, higher home building costs and an ongoing shortage of construction workers continue to plague efforts.
Additionally, many housing advocates point towards strict zoning regulations, as well as NIMBY (Not in My Backyard) attitudes in smaller municipalities as being major hindrances to homebuilding efforts in many suburban areas.
According to NAHB, however, homebuilders have begun to focus on lower density areas throughout the U.S. where these zoning laws may not be as strict as they are in thickly settled areas. While the trend did start to occur post-pandemic due to a rise in remote work, the continued struggle to fill housing demand has helped propel it into the new year.
Pulling numbers from the NAHB, 50% of the U.S. population live in counties that in the 90th to 100th percentile in terms of population density. This means half the total U.S. population lives in 10% of the high-density areas in the nation.
Originally, these high-density areas constituted just about 40% of all single family construction in 2018. That market share has fallen since then, but only to 36%, and that number was achieved back in 2022 with the decline seemingly evening itself out since then as it was last clocked in at 35.7% in the third quarter of this past year.
Permits, largely considered to be a potential monitor for market sentiment, did see a bump up in December. Overall permits decreased 0.7% to a rate of 1.48M in December, however, single-family permits increased 1.6% to a rate of 992,000. This left multifamily permits as the dragging force, dropping 5.0% to a 491,000 pace.
In 2024, the total number of permits being taken out was down 2.6% from 2023, clocking in at 1.47M. Single family permits, however, were up 6.6% from the year prior, totalling 981,000.
Looking at regional data, permits were 1.5% higher in the Northeast, 3.5% higher in the Midwest, 3.1% lower in the South and 6.6% lower in the West.
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