US housing starts surged last month to highest in 13 years

[WASHINGTON] Groundbreakings on new US homes surged in December to a 13-year high, giving the housing market momentum heading into the new year amid low mortgage rates, solid job growth and optimistic buyers and builders.

Residential starts rose 16.9 per cent to a 1.61 million annualised rate after an upwardly revised 1.375 million pace in the prior month, according to government figures released Friday. The gain was the biggest in three years and well above all estimates in a Bloomberg survey. Permits, a proxy for future construction, fell 3.9 per cent to 1.42 million.

The data indicate residential construction added to fourth-quarter growth after contributing in the previous quarter for the first time since the end of 2017. While weather may have played a role in the month's data, demand has been fueled by mortgage rates near a three-year low as the job market remains resilient and wage gains help put money into the pockets of potential homebuyers.

Construction of single-family homes rose 11.2 per cent to the highest since mid-2007, while permits for those dwellings decreased 0.5 per cent. Groundbreakings for the multifamily category, which tends to be more volatile and includes apartment buildings and condominiums, jumped 29.8 per cent to the highest since 1986.

The full-year gain was more subdued, as new-home construction rose 3.2 per cent following 3.9 per cent in 2018. Permits were up 3.9 per cent in 2019.

Even so, the strong overall reading on starts corroborates a jump in developers' confidence. US homebuilder sentiment posted the highest back-to-back readings since 1999 in December and January amid a jump in prospective buyers and a bump in the sales outlook.

BLOOMBERG