Overall U.S. housing starts remain underwhelming but the long-term outlook is trending up even while mortgage rates remain elevated.
Homebuilders started work last month on a seasonally adjusted annual rate of 1.289 million units, according to data released Wednesday by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development. That's 1.8% below the October figure and 14.6% below the November 2023 output.
Single-family starts totaled 1.011 million units, up 6.4% from October but still down 10% percent from November 2023. Single-family starts rose sharply in the South after hurricanes Helene and Milton disrupted construction in September and October.
"Despite the persistence of 'higher for longer' mortgage rates, the housing market remains underbuilt in many parts of the country," said Odeta Kushi, deputy chief economist at real estate firm First American, in a post on X, formerly known as Twitter. "The new home market is poised to continue to outperform the existing home market because builders have inventory to sell and are willing to offer incentives such as mortgage rate buydowns to attract buyers."
While total housing deliveries were down, Kushi noted a monthly increase in single-family completions provided "immediate relief to a supply-starved housing market."
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The decline in overall starts is less significant because it was due to a drop in multifamily construction that tends to be more volatile month to month, according to Nancy Vanden Houten, lead economist at research firm Oxford Economics. She noted that building permits, a forward-looking indicator, jumped to their highest level since February.
"Looking to next year, we expect a gradual improvement in starts, but see downside risks to our forecast from sticky mortgage rates and potential labor shortages and higher building costs under President-elect Trump's policies on immigration and tariffs," Vanden Houten said in a statement.
The National Association of Home Builders trade group is more optimistic about a Trump presidency, saying it expects "regulatory relief" with a new administration.
Builder sentiment for the new single-family home market has been on the rise this fall and maintained its reading of 46 in December, according to the National Association of Home Builders/Wells Fargo Housing Market Index released this week.
