By Ruth Mantell, MarketWatch
WASHINGTON (MarketWatch) — Construction on new U.S. homes jumped in December to the highest rate in more than four years, with gains across the country, as well as in single-family homes and buildings, the U.S. Department of Commerce reported Thursday.
In the freshest data signaling a strengthening housing market, starts rose 12.1% in December to a seasonally adjusted annual rate of 954,000 — the highest level since June 2008.
“Overall, this report reinforces the current narrative of a positive growth momentum in the housing sector,” said Millan Mulraine, a macro strategist at TD Securities.
Economists polled by MarketWatch had expected U.S. housing starts to increase to a rate of 883,000 from an original estimate of 861,000 for November, on factors such as rising building permits and confidence among home builders, as well as relatively mild weather for the season. See economic calendar.
On Thursday, the government revised November’s rate to 851,000.
Starts rose 24.7% in the Midwest, 21.4% in the Northeast, 18.7% in the West and 3.8% in the South. By structure size, starts for single-family homes rose 8.1%, and increased 20.3% in buildings with at least two units.
While starts in December were up 37% from a year earlier, rates remain far below a bubble peak of almost 2.3 million in 2006.
Meanwhile, building permits, a sign of future demand, rose 0.3% in December to a rate of 903,000 — the highest rate since July 2008. Permits for single-family homes rose 1.8% to a rate of 578,000, while permits for structures with at least two units declined 2.1% to a rate of 325,000. The lower growth in permits means that starts could slow down in coming months.
For all of 2012, the government estimated that there were 780,000 housing starts, the highest level since 2008 and up 28% from 2011.
Meanwhile, permits rose 30% to 813,000 in 2012, also the highest level since 2008. Housing completions rose 11% to 651,000 in 2012, the highest level since 2010.
An improving trend for housing starts echoes other recent housing data. Confidence among home builders is holding at a more-than-six-year peak, with more markets showing signs of recovery, a trade group said Wednesday. Read more about builder confidence.
Given gains in the housing market, analysts expect this component of the economy to increase its contribution to overall gross-domestic-product growth. “Housing is poised to provide a meaningful (and critical) lift to overall economic activity at a time when other growth drivers, like exports, are slowing,” Deutsche Bank analysts wrote in a Wednesday note.
An exchange-traded fund of home builders ITB +0.22% has increased 68% over the past 12 months. Indeed, home prices have been rising year-over-year, and the rate of price reductions in the U.S. is falling. Read more about home markdowns.
Mortgage rates hovering near record lows is supporting demand. However, analysts remain concerned about overly stringent lending standards, as well as fallout from ongoing fiscal uncertainty. Looking to spur lending, federal regulators have issued new rules on mortgages and servicing that they hope will provide some certainty to industry and borrowers.