Housing starts drop 9.8%

Activity slows after a long year of tepid growth

While housing starts dropped 9.8% from November to December, they did manage to grow 1.6% from December 2012, the U.S. Census Bureau said Friday.

The data points to tepid growth over an extended period of time, followed by a slow down at the end of 2013.

A strictly numbers-to-numbers comparison shows the month of December brought 999,000 privately-owned housing starts, compared to a revised figure of 1.107 million in November and 983,000 last year.

Overall, an estimated 923,400 housing units were recorded in 2013, up 18.3% from the 2012 figure of 780,600.

Looking at single-family starts alone, the month of December brought a start rate of 667,000 units, down 7% from a revised November figure of 717,000.

The December rate for units in buildings with five units or more hit 312,000 units last month.

"Construction is much farther below long-term normal than home prices and sales volumes, which have largely recovered," said Jed Kolko, chief economist and vice president of analytics with Trulia. "Slow household formation and elevated vacancy rates explain why construction remains far below normal."

Since monthly construction starts tend to be volatile, the full-year comparison gives a better description of the state of the market, Kolko explained.

Building permits for privately-owned housing units also declined, posting an annual rate of 986,000 in December, down 3% from November’s revised rate of 1,017,000, but up 4.6% from the December 2012 estimate of 943,000 units.

Permits to build just single-family homes reached a rate of 610,000 units last month, a 4.8% drop from November.

"Atypically adverse winter weather may have played a role in slippage for starts and permits for December. Starts and permits topped the completions pace of 0.744 million units in December," analysts with Econoday said.

Meanwhile, housing completions in December hit an annual adjusted rate of 744,000, down 10.8% from the revised November estimate of 834,000, but up 10.7% from the December 2012 rate of 672,000.

"The positive gap between permits and completions indicates that construction activity in the housing sector is still positive but the level of permits suggests deceleration," Econoday analysts added.

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