US: Home building ends 2021 with strong momentum – Wells Fargo

Economic numbers released on Wednesday surpassed expectations in the US with Housing starts rising 1.4% in December to 1.70 million (annual). Analysts at Wells Fargo point out a milder than usual weather allowed more construction to take place in what is normally a seasonally slow month.

Key Quotes: 

“Home building finished 2021 on a high note and appears to have strong momentum headed into the new year. Overall housing starts rose 1.4% to a 1.702 million-unit pace. Multifamily starts surged 13.7% during the month and accounted all of December's increase. Single-family starts fell 2.3% but remains at a high level at a 1.172 million-unit pace. Milder than usual weather allowed work to begin on more projects than usual during December, which explains the stronger-than-consensus print in overall starts. The consensus estimate had called for a modest drop to a 1.65 million-unit pace.”

“With the December data, we now have preliminary data for 2021. Home builders began construction on 1,595,100 homes in 2021, with single-family starts totaling 1,123,100 units. That marks the best year for single-family starts since 2006.”

“Housing permits, which tend to lead starts by 30 to 90 days, rose even more this past year. Overall permits jumped 17.2% in 2021 to 1.725 million. Single-family permits rose 13.4% to 1.111 million, while multifamily permits surged 24.9% to 614,000 units. The strength in permits suggests homebuilding is set for another strong year, even with rising mortgage rates. We expect overall starts to rise 4% to 1.660 million units. Inventories of new and existing homes remain near historic lows, while apartment vacancy rates recently fell to an all-time low.”