New-home construction in the US retained a strong pace in December, a sign the housing market can absorb modestly higher interest rates.
US housing starts decreased 9.8 per cent last month to a seasonally adjusted annual rate of 999,000, the Commerce Department said Friday. But the figure was well above summer levels and exceeded economists’ forecast for 975,000 starts in December.
November’s pace, revised up to 1.11 million from the previous estimate of 1.09 million, was the strongest in more than five years.
December building permits, an indicator of future construction, declined 3 per cent to a 986,000 pace. Permits also fell in November.
Housing Starts, US
For all of 2013, housing starts advanced 18.3 per cent from the prior year to 923,400.
That marked the strongest year for starts since 2007, the year the recession began. Permits were up 17.5 per cent from 2012 to 974,700, also the strongest reading since 2007.
Single-family home starts fell 7 per cent to a annual pace of 667,000 in December. Despite the drop, the level was still the second strongest reading in the category since May 2008.
Home construction figures had broadly trended up since the start of 2011 untilthe early part of last year. However, when interest rate rose sharply in the spring, the pace of building slowed. Rising rates make mortgage payments more expensive for buyers.
Despite the improvement during 2013, builders remain cautious. Home builder confidence slipped slightly in January, according to the National Association of Home Builders’ survey released Thursday. However, the figures still indicated that most home builders view conditions favorably.