US Housing Starts: Trend is undeniably strong – Wells Fargo

Data released on Friday in the US showed that Housing Starts rose jumped 16.9% in December to the highest level in 13 years. Economist at Wells Fargo, explained that the headline was boosted by unusually warm weather and year-end factors, but the trend is undeniably strong.

Key Quotes: 

“Housing starts surged 16.9% to a 1.61 million-unit pace, the highest level since December 2006. Big jumps like this are not unusual for December. The seasonal adjustment factors for the month are huge and unseasonably mild weather, as we had this past December, can often lead to exaggerated jumps in the seasonally adjusted data. There is also a tendency for multifamily starts to surge at year-end, as developers race to get projects started ahead of new mandates that tend to begin at the start of each year. In terms of actual data, housing starts on a non-seasonally adjusted basis s rose 3.2% in December, when activity normally declines sharply.”

“Permits were the soft spot of today’s report, with single-family down 0.5% and multifamily down 9.6%. The pace of starts and permits—for both singlefamily and apartments—was strong for the entire second half of 2019, which means that even if activity stabilizes from here, we will still see sizable yearover-year gains in 2020. Moreover, we expect to see continued gains."

“While the gap between multifamily permits and starts narrowed in December, it remains unusually large with the trend in permits well above the trend in starts.”