After jumping up 8.9% one month earlier, housing starts declined 4% to a seasonally adjusted annual rate of 557,000 in December, according to the Department of Housing and Urban Development (HUD) and the Commerce Department’s Census Bureau. Building permits, on the other hand, rose nearly 11%, as contractors look to increase supply before the expiration of the tax credit. December’s drop from November’s revised estimate of 580,000 is 0.2% higher than the December 2008 rate of 556,000. While small, the year-over-year increase is the first in nearly four years. Single-family starts in December were at a rate of 456,000, 6.9% below the revised November total of 490,000, while the December rate for buildings with five or more units was 92,000, up from the initial rate of 83,000 in November. The Census and HUD said an estimated 553,800 housing units were started in 2009, 38.8% below the 2008 figure of 905,500. The seasonally adjusted annual rate of privately owned housing completions was 768,000 in December, 11.2% below the revised November estimate of 865,000 and is 25.3% below the December 2008 rate of 1.028m. Single-family completions were at a rate of 503,000, 11.2% below November’s rate of 566,000. For buildings with five or more units, the rate was 245,000, down from November’s initial rate of 270,000. The 796,000 housing units estimated to have completed in 2009 was 28.9% below the 2008 figure of 1,119,700. Privately owned housing units authorized by building permits in December were at a seasonally adjusted annual rate of 653,000, 10.9% above the revised November rate of 589,000 and 15.8% above the December 2008 rate of 564,000. Single-family permits issued were at a rate of 508,000, 8.3% above the revised November rate of 469,000. Permits for buildings with five or more units were at a rate of 127,000, up from the initial estimate of 86,000 in November. An estimated 571,600 permits were issued in 2009, down 36.9% below 2008’s figure of 905,400. The year-end surge in permits may be related to a ramp up in new home inventory before the expiration of the new homebuyer tax credit. According to John Burns Real Estate Consulting’s (JBREC) monthly building market report released Wednesday, the supply of unsold homes sits at 7.9 months and the volume of new homes for sale declined to 234,000 homes, the lowest volume since April 1971. In the January edition of HousingWire, JBREC CEO John Burns said builders are beginning to ramp up construction to increase speculative house inventories so they’ll have enough homes to sell before the April 30 deadline for homebuyers wanting to take advantage of the federal homebuyer tax credit. Builders learned their lesson when the previous tax credit was about to sunset, Burns told HousingWire. The builders with inventory of spec homes to sell in September and October profited, while builders who ran out of homes were left on the outside looking in. This will be critical to existing homeowners who may put their homes on the market now, but won’t sell until spring, and need to close on a new home deal quickly. Burns said the extension’s passage was a confidence to builders to step up their spec construction, which has dragged since the onset of the housing downturn. The effect of an increased spec market is widespread, as builders will hire workers, buy supplies and set up sales efforts. While builder confidence is up, the tax credit won’t affect the availability of construction loans, a hindrance to small private builders and an opportunity for the large builders who aren’t reliant on bank loans for liquidity. “The big builders are going to gain a lot of market share in the coming months,” Burns said, adding even if builders overbuild, “it may kick start some job creation and business in the construction industry, which really needs it.” Write to Austin Kilgore.