U.S. housing starts tumbled in December, capping a weak year for construction of new single-family homes due to factors such as rising construction material and labor costs.
Housing starts dropped 11.2% in December from the prior month to a seasonally adjusted annual rate of 1.078 million, the lowest level in more than two years, the Commerce Department said Tuesday. Residential building permits, which can signal how much construction is in the pipeline, edged up 0.3% from November to an annual pace of 1.326 million.
Economists surveyed by The Wall Street Journal had expected a 1.3% decrease for starts and a 2.9% decrease for permits.
Housing-starts data are volatile from month to month and can be subject to large revisions. December’s 11.2% decline for starts came with a margin of error of 14.0 percentage points.
Single-family home building stagnated in 2018, after steadily climbing throughout the expansion. Construction of multifamily buildings continued to ease as the market for new condominiums and apartments has cooled.
The Commerce Department’s report on housing starts in December was delayed by more than a month due to the partial government shutdown.
The broader trend shows starts rose by 3.6% in 2018 compared with 2017.
Starts were down 6.7% in December from the prior month for single-family construction and down 20.4% for buildings with two or more units compared with November. Permits in December were down 2.2% for single-family homes and up 4.9% for multifamily construction.
Despite strong economic growth and a historically low unemployment rate, factors that should support home-buyer demand, a shortage of inventory and rising borrowing costs have locked out many would-be buyers.
While affordability remains a key concern, home-builder sentiment picked up in the first two months of this year after pulling back in much of 2018. The National Association of Home Builders attributed strengthening home-builder confidence to lower mortgage rates.