New residential construction in the U.S. jumped by much more than expected in the month of December, according to a report released by the Commerce Department on Thursday.
The report said housing starts spiked by 5.8 percent to an annual rate of 1.669 million in December from the revised November estimate of 1.578 million.
Economists had expected housing starts to climb by 0.8 percent to a rate of 1.560 million from the 1.547 million originally reported for the previous month.
With the much bigger than expected increase, housing starts soared to their highest level since reaching a rate of 1.720 million in September of 2006.
Single-family starts led the way higher, skyrocketing by 12.0 percent to a rate of 1.338 million, while multi-family starts tumbled by 13.6 percent to a rate of 331,000.
The Commerce Department said building permits also surged up by 4.5 percent to an annual rate of 1.709 million in December from the revised November rate of 1.635 million.
Building permits, an indicator of future housing demand, had been expected to slump by 2.1 percent to a rate of 1.604 million from the 1.639 million originally reported for the previous month.
The unexpected increase lifted building permits to their highest annual rate since reaching 1.722 million in August of 2006.
Single-family permits jumped by 7.8 percent to a rate of 1.226 million, while multi-family permits fell by 3.0 percent to a rate of 483,000.
“We expect the pace of housing starts to moderate in 2021 as homebuilders confront constraints including high lumber prices and shortages of lots and labor,” said Nancy Vanden Houten, Lead U.S. Economist at Oxford Economics.
She added, “However, we still expect recovering demand, low mortgage rates and a shortage of supply to support a healthy rate of new home construction, and the risk may be for further upside surprises.”
On Wednesday, the National Association of Home Builders released a report showing an unexpected drop in U.S. homebuilder confidence in the month of January amid concerns about rising material costs and the resurgence of the coronavirus.
The report said the NAHB/Wells Fargo Housing Market Index fell to 83 in January after sliding to 86 in December. The continued decline surprised economists, who had expected the index to come in unchanged.
With the unexpected decrease, the housing market index pulled back further off the record high of 90 set in November.
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