Housing starts decline while building permits pick up

Construction of new homes in the U.S. fell for the first time in four months in December, dragged down by a drop in single-family home building.

Residential starts decreased 4.3% last month to a 1.46 million annualized rate, government data showed Thursday. Single-family home construction fell by the most since July 2022, following a surge in November, while multifamily projects rose to a five-month high.

Building permits, which indicate future construction, increased to a 1.50 million pace. Applications for one-family homes rose to the strongest pace since May 2022, and multifamily authorizations edged higher, the data showed.

The pickup in building permits suggests new construction will remain on an upward trend as lower mortgage rates boost demand for housing. And with homeowners still mostly reluctant to move, buyers have been finding more inventory in the new homes market, which helped lift builder sentiment this month by the most in nearly a year.

Data from the Mortgage Bankers Association this week showed a gauge of mortgage applications for home purchases recently rose to a six-month high. When mortgage rates peaked in October, that figure plunged to the lowest level since 1995.

Housing starts fell in three of four regions, while they climbed to a five-month high in the West, according to the report. The number of single-family homes completed advanced to the strongest pace in over a year, which should help alleviate an inventory shortage that's been keeping prices elevated.

The housing starts data will feed into economists' estimates of home construction's impact on gross domestic product. The government's initial estimate of fourth-quarter GDP will be released next week.

Upcoming data on both existing- and new-home sales will provide further clues on the outlook for the U.S. housing market.

A separate report Thursday showed initial applications for U.S. unemployment insurance unexpectedly plunged to the lowest level since September 2022, while the number of people already receiving benefits also dropped.