Following a decline associated with unusually wet weather in November, U.S. housing starts bounced back in December, bringing single-family production to a record annual level in 2004. Furthermore, the backlog of unused permits rose in December, providing forward momentum for housing production starting off the new year.
Housing starts in December climbed 10.9 percent to a seasonally adjusted annual rate of 2.0 million, according to the Commerce Department's monthly report on residential construction. A total of 1.95 million housing units were started last year, up 5.7 percent from 1.85 million starts in 2003.
"The nation's home builders continue to move forward to meet the strong housing demand that has characterized the marketplace for some time, and we are confident that 2005 will be another excellent year for housing," said NAHB president David Wilson, a custom home builder from Ketchum, ID, U.S.
Mr. Wilson noted that the industry was helped last year by persistently low mortgage interest rates, and he said that ongoing gains this year in jobs and household income should help offset the slow but steady rise in mortgage interest rates that is anticipated as a result of Federal Reserve policy. "We are geared up for another big housing year," Mr. Wilson said, "although we don't expect to be building at quite the break-neck pace of 2004."
Single-family production was up 13.1 percent in December to an annual rate of 1.68 million units, the second strongest monthly pace for all of 2004. The 1.61 million single-family homes started in 2004, an all-time high, was 7.3 percent above the 1.50 million single-family units started in 2003.
Multi-family housing starts were up 0.6 percent in December, at a seasonally adjusted annual rate of 326,000; they were down 1 percent for the year, slipping to 345,000 units from 349,000 units in 2003.
"Home building in December was absolutely solid, finishing up the year nicely after some softening in November that was related to bad weather," said David Seiders, chief economist of NAHB. "The level of unused building permits moved up last month, and that is a favorable sign for starts activity as we move forward this year." He added that builders polled in this month's NAHB/Wells Fargo Housing Market Index (HMI) expressed a high degree of optimism about housing market conditions currently and during the next 6 months.
Mr. Seiders said he expected to see a modest decline, of roughly 3 to 4 percent, in housing starts this year as the result of higher mortgage rates, which are projected to average about 6.3 percent on fixed-rate loans, up from 5.8 percent last year.
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