US housing starts experienced an unexpected decline last month, largely driven by a significant drop in multi-family construction projects, as revealed by government data released on Wednesday. Housing starts decreased by 1.8%, landing at a seasonally adjusted annual rate of 1.29 million units in November, a drop from October's 1.31 million figure, according to data from the Census Bureau and the Department of Housing and Urban Development.
This month's figures fell short of the 1.35 million consensus forecast, which would have indicated a 2.6% increase over October's level that remained mostly unchanged in the latest report. The decline in starts for November is perceived as "less worrisome than it appears on the surface" since it was primarily driven by the multi-family segment, which tends to be more unstable, as expressed by Nancy Vanden Houten, lead economist at Oxford Economics.
"While the downturn in starts introduces some risk to our forecast expecting an average of 1.34 million starts in the fourth quarter, the data on permits aligns with our projection for a modest increase in starts throughout 2025," Vanden Houten elaborated in her emailed comments. On a yearly basis, housing starts have plummeted nearly 15%, as conveyed by the Census Bureau and HUD. Specifically, the segment for buildings with at least five units suffered a staggering 24% decline month over month to 264,000, reflecting a nearly 29% decrease from November 2023.
Conversely, the single-family construction component saw a sequential increase of 6.4%, reaching 1.01 million units, although it still represented a 10% drop compared to the previous year. Geographically, construction starts in the Midwest plummeted by 28%, while the West experienced a 12% decline.
Meanwhile, the Northeast and South regions reported increases of over 10% each, as documented by the Census Bureau and HUD. Building permits, serving as a forward-looking measure of homebuilding activity, witnessed a 6.1% increase month over month, arriving at 1.51 million units, marking the highest level since February and exceeding the market's forecast of 1.43 million units.
There was a substantial jump of around 22% in authorizations for units within buildings comprising five or more units, while single-family permits only saw a slight uptick of 0.1% on a seasonally adjusted basis. Year-over-year, total permits dipped by 0.2% in November. Mortgage completions noted a 1.9% dip month over month, totaling 1.6 million units. Recent data from the National Association of Home Builders and Wells Fargo, released on Tuesday, indicated that homebuilder confidence remained stable in December.
This steadiness stems from a combination of optimism surrounding an enhanced regulatory climate, tempered by challenges like high prices and mortgage rates. "Looking to the upcoming year, we foresee a gradual recovery in housing starts; however, we acknowledge the downside risks to our forecast stemming from persistent high mortgage rates, potential labor shortages, and increased building costs influenced by president-elect Trump's immigration and tariff policies," noted Vanden Houten..