Twenty-seventeen closed as one of the best year for residential construction in a decade, with an estimated 1.15 million housing units completed in 2017, showing an 8.7 percent increase over the 2016’s 1.05 million houses, according to a joint report released by the U.S. Department of Housing and Urban Development (HUD) and the U.S. Census Bureau on Thursday.
The report indicated that privately owned housing units authorized by building permits in December were at a seasonally adjusted annual rate of 1.3 million, a decrease of 0.1 percent below the revised November rate, but 2.8 percent above the same period last year. Single-family authorizations in December were at a rate of 881,000, 1.8 percent above the revised November figure of 865,000. An estimated 1.2 million housing units were authorized by building permits in 2017 showing a 4.7 percent increase over the same period last year.
“While 2017 was a great year for permits, they were only 65 percent of the 50-year average when taking into account the size of the U.S. population. Much of the increase in permits last year was due to a sharp increase in single-family homes, which surged nearly 5 percent,” said Ralph McLaughlin, Chief Economist at Trulia.
Things looked different for multifamily permits, which fell 2.5 percent from 421,000 in 2016 to 410,300 last year. And with for-sale inventory continuing to fall and rents moderating, these trends in permitting activity are likely to continue this year.
The HUD report indicated that privately owned housing starts in December were at 1.19 million, an 8.2 percent decrease from the November estimate and a 6 percent decrease from December 2016. Additionally, single-family housing starts in December were at a rate of 836,000, 11.8 percent below the revised November figure. The report estimated 1.2 million housing units were started in 2017, an increase of 2.4 percent from 2016.
“The infusion of single-family homes into the market last year was a needed tonic, exactly the type of new inventory frustrated homebuyers yearned for,” McLaughlin said. Additionally, elevated levels of confidence among homebuilders, combined with the housing markets most nagging issue‒‒low inventory‒‒should make 2018 “a ripe year” for single-family construction to grow.
McLaughlin said that new construction would have to pick up substantially this year in order to make much of a dent in the country’s inventory woes.
“New construction last year would have been even higher had it not been for a sharp slowdown in multifamily permits and starts,” he said. “While we applaud new multifamily construction in helping moderate rents over the past few years, we see the slowdown as a healthy retreat that will continue this year,” McLaughlin said.