December Housing Starts: Clear Declines, But an Incomplete Picture

• December housing starts fell 11.2 percent from November and 10.9 percent from a year ago, to just over 1 million units (SAAR) according to the Census Bureau. Starts were down most sharply in the inventory-starved West.
• Single family starts down 6.7 percent from November; multifamily starts were down 22 percent month-over-month. December was the weakest month for single-family housing starts since August 2016.
• Housing permits rose 0.3 percent from November and 0.5 percent from December 2017.
• National housing completions fell 2.7 percent from November and 8.4 percent percent from December 2017.

With two months' hindsight, there were obvious headwinds to the housing market late last year that have since eased. High interest rates, a stock market freefall and the partial government shutdown translated into a drag on the housing market. Most housing market metrics – including starts and permits – now reflect the fallout from the fourth-quarter economic turmoil.

But December now feels like a lifetime ago – especially in the housing market. Mortgage rates are down from seven-year highs to 12-month lows, and the interest rate outlook is less ambitious with the Federal Reserve pausing hikes until they get more data on the state of the economy.

While homeowners can move quickly to list a home for sale or pull it off the market when the market shifts, builders have a slower, wider turn radius in reacting to interest rates and other market factors. As a result, builders will be less agile at reacting to the shifting economic outlook. However, the stronger market conditions in early 2019 mean than home builders have been able to offload inventory that had been piling up late last year.

Today’s data should have been released several weeks ago, but were delayed as a result of the partial government shutdown. Delayed economic data releases have clouded our read on the state of the economy – a lasting effect of January’s political brinkmanship.