US housing starts top all forecasts on multifamily construction

Housing starts in the US climbed in December to the fastest pace since early 2024, reflecting a surge in multifamily projects and a more modest advance in one-family homes.

New residential construction increased nearly 16% to an annualized rate of 1.50 million, rebounding after a three-month slump, according to government data released Friday. The figure exceeded all estimates in a Bloomberg survey of economists.

Single-family starts, which account for most new construction, climbed 3.3% to a 1.05 million annualized rate, also the strongest since February 2024.

Construction of new multifamily projects, such as apartments, surged nearly 62%, the most since 2011. But multifamily data are volatile, especially in the winter, when activity is low and seasonal adjustments “pump up” the readings, Stephen Stanley, chief economist for Santander US Capital Markets LLC, said in a note Friday.

The average over two months is close to the average for the year, Stanley wrote. “Thus, this is merely a case of lumpy monthly readings, not evidence of a shift in the underlying trend.”

Despite the robust monthly advance, new home construction for all of 2024 was the slowest since 2019. Mortgage rates were above 6% all year and are now higher than 7%, compounding an affordability crisis initially brought on by record-high prices.

Contractors have managed to keep buyers coming in the door with sales incentives, including mortgage rate buydowns, in which they make up-front payments on behalf of customers to reduce their interest expenses. But customer cancellations are rising, and while builders say overall market conditions have improved recently, their outlook for the next six months fell this month for the first time since June.

Building permits, which point toward future construction, last month decreased 0.7% to a 1.48 million annual rate, entirely due to a drop in multifamily, according to the government housing report. Authorizations for single-family homes rose at the fastest pace since February.

As builders respond to more tepid demand — and sit on the most unsold inventory since the housing crisis — the number of homes under construction has been trending down in the past year and eased last month to the lowest since August 2021. Completions also slowed further, hitting the slowest pace since March.

Across the US, starts increased in three of four regions — including a nearly 18% jump in the South, the nation’s biggest homebuilding region.

The new residential construction data are volatile, and the government report showed 90% confidence that the monthly change ranged from a 1.4% to 30.2% gain.