• “Housing starts increased in December, but much of the increase was due to a mild recovery from November’s large drop. Despite the modest bump, housing starts in 2016 were the best since 2007 and represents promising growth for the sector in 2017.”
  • “While starts increased modestly in December, they are only at 62% of their long-run average. Clearly, starts have much room to grow to meet historical norms.”
  • “While some of the challenges that homebuilders face are cyclical, stemming from an historically abhorrent fiscal recovery that started with the Great Recession, many of the challenges are also structural. Decades in the making, the latter originated from the sea change of strict land regulations that swept much of the country during the 1970s and 80s. So while there is much room for growth in starts as the economy continues to grow, the recovery in new construction will be slow and steady because of these structural challenges.”

Housing starts in December were at a seasonally adjusted rate of 1,226,000, which is an increase of 5.7% year-over-year and 11.3% month-over-month. However, the increase in December was not enough to offset November’s large drop. Despite the modest bump, starts in new housing construction was at its highest since 2007. There’s also much room to grow from an historical perspective. When controlling for the number of households in the U.S., housing starts are still only 62% of its 50-year average, but this is up from 55% last month.

monthlystarts_jan17

While some of the challenges that homebuilders face are cyclical, stemming from an historically abhorrent fiscal recovery that started with the Great Recession, many of the challenges are also structural. Decades in the making, the latter originated from the sea change of strict land regulations that swept much of the country during the 1970s and 80s. So while there is much room for growth in starts as the economy continues to grow, the recovery in new construction will be slow and steady because of these structural challenges.

 

annualhousingstarts_jan17