Construction of new US housing shot to a 13-year high last month, government data showed on Friday, a sign that homebuilders were racing to catch up with pent-up demand.
The surge was led a sudden boom in apartments, where construction hit its fastest pace in 33 years, according to the Commerce Department figures.
The December jump could support GDP growth in the fourth quarter of 2019 after an extended period in which the housing sector was a drag on the wider American economy.
However permits for new construction — a sign of housing in the pipeline and a less erratic indicator — fell more than expected.
Total housing starts jumped 16.9 per cent for the month to 1.6 million units, shattering forecasts to hit the fastest pace since December of 2006.
Single-family starts were also at a post-recession high of 1.1 million units, the speediest pace since June of 2007, while buildings with five or more units zoomed to their quickest pace since July of 1986.
The Federal Reserve cut interest rates three times last year, helping to soften mortgage costs and offset some of the sting of rising home prices.
Rising wages and low unemployment have also helped spur demand for houses, giving builders an incentive to make more homes.
‘Spectacular but clearly unsustainable,’ Ian Shepherdson of Pantheon Macroeconomics said in a client note, adding that a January correction was likely.
Builders in the Northeast and the West, which faces an acute housing shortage, led the gains in multi-family dwellings. An unusually warm December may also have helped construction.
Officials warn that housing starts are subject to broad margins of error and trends may not be apparent for six months.
Permits for new homes are less weather sensitive and have lower margins of error, however.
And permits in December fell 3.9 per cent, led by a plunge in apartments, particularly in the Midwest and South regions.
‘But the trends are increasing, and we expect further gains this year, given the rising trend in new home sales,’ Shepherdson said.
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