The US housing market recovery was back on track amid low mortgage rates.
The US housing market recovery was back on track amid low mortgage rates. The US homebuilding surged to a 13-year high in December as activity increased across the board and this could help support the longest economic expansion on record.
There was also some encouraging news on manufacturing, with other data on Friday showing production at factories increasing for a second straight month in December, indicating some stabilisation in one of the industries hardest hit by the Trump administration’s 18-month trade war with China.
Though US President Donald Trump and Chinese Vice Premier Liu He signed a “Phase 1” trade deal on Wednesday, a first step toward defusing the trade war, manufacturing is not out of the woods yet. Boeing this month suspended production of its fast-selling 737 MAX jetliner and ripple effects of that decision are already being felt, with a major supplier announcing layoffs last week.
“The shockingly large rise in home construction is likely to provide an unexpected boost to growth,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania. “However, the first quarter of 2020 it might be a lot softer.”
Housing starts jumped 16.9 per cent to a seasonally adjusted annual rate of 1.608 million units last month, the highest level since December 2006. The percentage gain was the largest since October 2016. Groundbreaking activity last month was likely flattered by unseasonably mild weather and probably overstates the health of the housing market. Data for November was revised higher to show homebuilding rising to a pace of 1.375 million units, instead of advancing to a rate of 1.365 million units as previously reported.
Economists polled by Reuters had forecast housing starts would increase to a pace of 1.375 million units in December.
The dollar firmed against a basket of currencies, while US Treasury debt prices fell. Stocks on Wall Street were trading higher, with the main indexes hitting record highs.
Housing starts soared 40.8 per cent on a year-on-year basis in December. An estimated 1.290 million housing units were started in 2019, up 3.2 per cent compared to 2018.
The rise in construction, together with an increase in completions and the inventory of homes under construction, could ease a housing shortage that has constrained sales over the last couple of years. Housing completions increased 5.1 per cent to a rate of 1.277 million units in December.