Housing starts unexpectedly surged in December
US homebuilding increased to a nine-month high in
December amid a surge in multi-family housing projects
but soaring prices for materials after the government
nearly doubled duties on imported Canadian softwood
lumber could hamper activity.
The Department of Commerce reported that housing starts
rose 1.4% to a seasonally adjusted annual rate of 1.702
million units last month, the highest level since March.
Housing starts totaled 1.595 million in 2021, up 15.6%
The volatile multi-family housing segment accounted for
the rise in homebuilding last month, with starts for
buildings with five units or more surging 13.7% to a rate
of 524,000 units, in part due to strong demand for rental
The report also showed the number of homes authorized
for construction but not yet started surged to a record high
last month, underscoring the challenges builders are facing
from supply constraints. Rising mortgage rates could also
hurt homebuilding this year.
Single-family housing starts, which account for the largest
share of the housing market, dropped 2.3% to a rate of
1.172 million units last month. Single-family
homebuilding soared in the Northeast and Midwest, likely
boosted by unseasonably mild temperatures in December.
The densely populated South, where the bulk of
homebuilding occurs reported an 8.2% decrease in singlefamily
starts. Homebuilding also fell in the West.
The outlook for US. home building in 2022 is cloudy. In
November the US nearly doubled the duties on imported
Canadian softwood lumber to 17.9% after a review of its
anti-dumping and countervailing duty orders.
The National Association of Home Builders/Wells Fargo
Housing Market index of confidence among U.S. singlefamily
homebuilders slipped in January after four straight
monthly increases. Homebuilders¡¯ upbeat view of current
sales conditions remained unchanged, but expectations for
the next six months fell amid concerns about inflation,
interest rates and material costs. NAHB Chairman Chuck
Fowke said in a statement.
Meanwhile, Canadian housing starts cooled in December,
following a strong gain in the previous month, although
they remain at historically high levels. For the 2021
calendar year, starts were higher from the previous year,
bringing some relief to a housing market in which prices
are accelerating at a record pace.
Housing starts for December came in at a seasonally
adjusted annualized rate of 236,106 units, a 22% drop
from a revised 303,813 units in November the Canada
Mortgage and Housing Corporation said.
CMHC said that actual housing starts for 2021 were 21%
higher than the previous year.
Existing-home sales inch
Existing-home sales declined in December, snapping a
streak of three straight months of gains, according to the
National Association of Realtors.
Total existing-home sales dropped 4.6% from November
to a seasonally adjusted annual rate of 6.18 million in
December. From a year-over-year perspective, sales
waned 7.1% (6.65 million in December 2020).
"December saw sales retreat, but the pullback was more a
sign of supply constraints than an indication of a
weakened demand for housing," said Lawrence Yun,
NAR's chief economist. "Sales for the entire year finished
strong, reaching the highest annual level since 2006."
Despite the drop, overall sales for 2021 increased 8.5%
over 2020 sales. With 6.12 million homes sold, it was the
strongest year since 2006.
Each of the four major U.S. regions saw sales fall in
December from both a month-over-month and a year-overyear
basis. Existing-home sales in the Northeast fell 1.3%
in December, registering an annual rate of 750,000, a
15.7% decrease from December 2020.
Existing-home sales in the Midwest slid 1.3% to an annual
rate of 1,500,000 in December, a 2.6% decline from a year
ago. Existing-home sales in the South retreated 6.3% in
December, posting an annual rate of 2,700,000, a drop of
5.3% from one year ago.
Existing-home sales in the West decreased 6.8%, reporting
an annual rate of 1,230,000 in December, down 10.2%
from one year ago.
"We saw inventory numbers hit an all-time low in
December," Yun said. "Homebuilders have already made
strides in 2022 to increase supply but reversing gaps like
the ones we've seen recently will take years to correct."
US hiring again falls short of estimates
The US economy added far fewer jobs than expected in
December just as the nation was grappling with a massive
surge in Covid cases, the US Department of Labor
reported. Non-farm payrolls grew by 199,000, while the
unemployment rate fell to 3.9%, according to Bureau of
Labor Statistics data. That compared with the Dow Jones
estimate of 422,000 for the payrolls number and 4.1% for
the unemployment rate.
The unemployment rate was a fresh pandemic-era low and
near the 50-year low of 3.5% in February 2020. That
decline came even though the labor force participation rate
was unchanged at 61.9% amid an ongoing labor shortage
in the US.
Construction employment rose by 22,000 in December,
while Manufacturing added 26,000 jobs in December,
primarily in durable goods industries. Manufacturing
employment is down by 219,000 since February 2020.
Consumer sentiment nears 10-year low
US consumer sentiment soured in early January falling to
the second lowest level in a decade as Americans fretted
about soaring inflation and doubted the ability of
government economic policies to fix it.
The University of Michigan said its preliminary consumer
sentiment index fell to 68.8 in the first half of this month
from a final reading of 70.6 in December. Lower income
households held a more negative outlook than wealthier
ones, with sentiment dropping by 9.4% among households
with total incomes below $100,000 but rising by 5.7%
among households above that threshold.
Richard Curtin, the survey director, said in a statement in
early January three-quarters of consumers ranked inflation
as the most serious problem facing the country.
Wood products manufacturing reports decline in
Economic activity in the manufacturing sector grew in
December, with the overall economy achieving a 19th
consecutive month of growth, said the nation's supply
executives in the latest Manufacturing ISM Report on
"The manufacturing sector remains in a demand-driven,
supply chain-constrained environment, with indications of
improvements in labour resources and supplier delivery
performance. Shortages of critical lowest-tier materials,
high commodity prices and difficulties in transporting
products continue to plague reliable consumption.
Of the 18 manufacturing sectors followed by ISM,¡¯ the
category ¡®Furniture and Related Products¡¯ was among the
sector with the highest gains in December. The Wood
Products sector joined the Paper Products sector as two of
only three sectors that reported a decrease in December.
Home improvements expected to peak in 2022
Spending for home improvements and repairs is expected
to expand at a faster pace in 2022, but signs point to some
easing of growth by year-end, according to the Leading
Indicator of Remodeling Activity (LIRA) by the
Remodeling Futures Program at the Joint Center for
Housing Studies of Harvard University.
The LIRA projects double-digit gains in annual
homeowner renovation and maintenance expenditure will
top out in the third quarter of 2022 before beginning a
deceleration toward more sustainable rates of growth.
¡°Strong increases in home sales activity, household
incomes, and home equity levels are supporting a faster
expansion of the home remodeling market over the
coming year,¡± said Carlos Mart¨ªn, project director of the
Remodeling Futures Program at the Center. ¡°As owners
continue to navigate the ups and downs of the pandemic¡¯s
trajectory, the focus on home improvements for changing
wants and needs remains in sharp relief.¡±