26 Jan

Housing Starts Were Lower in December


Housing starts fell 8.2% in December

The storm-related surge in housing starts in the southern region seems to be subsiding after the hurricanes. The housing starts for December fell 8.2% and are 6% lower compared to 2016. The US Census Bureau and Department of Housing and Urban Development reported the housing starts in December at 1.192 million—a minor drop from the revised November reading of 1.299 million. Single-family housing starts, which are considered to have a higher positive impact on the market, have increased 3.5% from a year ago.

To account for high volatility in the segment, housing (PKB) starts are analyzed over a period instead of a monthly basis. The overall trend continues to remain positive.

Housing Starts Were Lower in December

Trends in the housing market

The southern region, which contributed to the sudden spike in housing activity, reported reduced activity in December. The other three regions reported minor changes in housing starts. Single-family starts in December were 836,000—a drop of 11.8% from November, while multi-family unit starts were 352,000. Looking at the overall recovery in the housing market since the recession, multi-family homes are giving way to single-family starts—a positive sign for the economy. Single-family homes contribute more to the economy.

Implications for homebuilders

Despite a slowdown in housing starts in December, the outlook for the housing market remains positive. Demand is expected to increase with economic progress. Companies like Lennar and D.R. Horton (DHI), which operate in this sector, has 52.8 percent and 69.2 percent returns in the last 52 weeks. The SPDR S&P Homebuilders (XHB) ETF, which has holdings in D.R. Horton, PulteGroup, and Lennar (LEN), as well as the DJ US Home Construction ETF (ITB) provide access to the housing market.

Next, we’ll analyze building permit data from December. We’ll discuss why the data dropped last month.

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