December housing starts came in at 1,192,000, 6.5% below the consensus of 1,275,000 and 6.0% below last year’s 1,268,000. Given the momentum that appeared in October and November, this is certainly a disappointing number to end the year, but one we think is a temporary speed bump as we enter what we expect to be a strong 2018.
Permits came in at 1,302,000, 1.0% above the consensus number of 1,290,000 and 2.8% higher than last year’s 1,266,000. This is the third straight month permits have exceeded 1,300,000 – the first time that has happened since 2007 – supporting our belief that the December dip in starts will be short-lived.
For the year, an estimated 1,263,400 housing units were authorized by permits and 1,202,200 were started, 4.7% and 2.4% above 2016, respectively. While some concern has been expressed by both builders and realtors that the new tax bill may lower home values and reduce incentives for home ownership, we expect the continued strength in job growth and wage growth, and especially the tight supply of existing homes for sale, to support higher levels of growth in both starts and permits in 2018 as compared to 2017.