Pace of Housing Production Slowed in December

January 19, 2006

Despite an anticipated year-end slowdown, U.S. home builders set a new record for single-family housing production in 2005, according to figures reported by the Commerce Department today.

“All in all, 2005 will be remembered as a superb year for the housing industry thanks to very favorable interest rates and the strong buyer demand they helped spur,” said NAHB President David Pressly, a small-market builder and developer from Statesville, N.C. 

“Total U.S. housing starts for the year 2005 topped 2.06 million units, which is up 5.6 percent from 2004 and the second-highest starts number on record following 1972’s 2.36 million units. On the single-family side, starts hit 1.71 million units for all of 2005. This is up 6.4 percent from 2004 and the best pace ever recorded. It’s also the third consecutive time that single-family starts have broken the annual record,” noted NAHB Chief Economist David Seiders.

In December, total housing starts declined 8.9 percent to a 1.93 million-unit seasonally adjusted annual rate. This downward movement was entirely due to a 12.3 percent decline in starts of single-family units, while multifamily starts rose by just over 10 percent.

“This report is an indication that the market is returning to a healthy and more sustainable pace, and is in line with what our builder surveys have been telling us,” said Seiders. “Also, some shifts in weather conditions contributed to the December decline. Looking ahead, our forecast indicates that starts activity could regain some ground in coming months as long-term mortgage rates ease from late-2005 levels. ”

Starts declined in three out of four regions in December, with only the South reporting a gain, of 5.2 percent. The Northeast, Midwest and West charted double-digit declines of 14 percent, 23.6 percent and 21.7 percent, respectively, owing in part to unusual swings in weather conditions. 

Building permits, which can be an indicator of future building activity, declined 4.4 percent overall in December, remaining just above a seasonally adjusted annual pace of 2 million units. This was due to a 5 percent decline on the single-family side and a 1.8 percent decline in permit issuance for multifamily units.

“It’s worth noting that the supply of permits that have been issued but not yet used for new single-family homes was up in the month of December,” said Seiders. “This could foreshadow a bit of a rebound in starts activity in the month ahead.”

For 2006 as a whole, NAHB’s forecast anticipates a 6.5 percent decline in national housing starts to approximately 1.93 million units.

Sourcew: NAHB

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