Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=198841
Story Retrieval Date: 8/28/2014 10:25:50 PM CST
Private-sector housing starts showed a larger-than-expected decline in December due to a sharp drop-off in construction of new multi-family units, a government report said Thursday.
The U.S. Department of Housing and Urban Development said starts dipped 4.1 percent in December to a seasonally adjusted 657,000 annual rate. That number fell short of the 680,000 unit mark forecasted by Bloomberg LP. Multi-family starts plunged 20.4 percent to 164,000 units.
On the other hand, single-family home starts, which make up the majority of the residential real estate market, rose by 4.4 percent to a rate of 470,000 units. December marks the third consecutive month that single-family starts have been on the rise.
An overabundance of unsold single-family houses will continue to affect housing starts, said Nick Parisi, a director with the Illinois Mortgage Bankers Association.
Still, he says the upward movement is a good sign. “The fact of the matter is, at least we’re going in the right direction,” Parisi said. “We’re starting to see some increase, and that’s a good thing.”
Brian Wesbury, chief economist of First Trust Portfolios LP, noted that multi-family starts are extremely volatile from month to month.
“The general trend in the multi-family sector has been up since mid-2009,” he said in an online commentary. “Given the shift away from home ownership and toward rental occupancy, we expect that trend to reassert itself over the next few months.”
Parisi also said he expects to see the numbers in multi-family housing increase during the coming months.
“More and more people are choosing the rental route,” he said. “A lot of people’s outlook on housing has changed. There’s a variety of reasons – attitudes have changed or people are unable to buy a house, but certainly the rental market has benefitted from it.”
Privately owned housing units authorized by building permits remained relatively unchanged from November, declining by just 0.1 percent. Permit authorizations for single-family homes, a forward-looking statistic, increased 1.8 percent from November, suggesting the rate of single-family housing starts may continue to make gains.
Despite last month’s slide in multi-family units, combined housing starts are up 24.9 percent versus a year ago, with single-family starts rising 11.6 percent and multi-family rocketing by 78.1 percent.
“With the exception of the temporary period in 2009-10 covered by the homebuyer credit, this is the largest 12-month gain since the housing boom was still intact, back in 2005,” Wesbury said. “In other words, the long-awaited turning point in home building has clearly arrived.”