; Homebuilding Is Leading the Economic Recovery

• Housing starts in December surged to the highest level since September 2006
• Housing permits in December rose to the highest level since August 2006
• PNC expects residential construction to continue to improve in 2021, boosting the overall economy

Housing starts rose 5.8% from November to 1.669 million units at a seasonally-adjusted annualized rate, better than consensus expectations for an increase to 1.560 million units.  Starts in November were revised 2% higher, to 1.578 million, from 1.547 million.

Single-family starts rose 12.0% in December to 1.338 million. This was the eighth straight monthly increase in single-family starts and the highest level of single-family starts since September 2006. Multifamily (apartment and condominium) starts fell 13.6% in December from November, to 331,000 at a seasonally-adjusted annualized rate; multifamily starts tends to be more volatile than single-family starts.

Residential construction permits increased to 1.709 million units at a seasonally-adjusted annualized rate in December, the highest level since August 2006; November permits were revised 0.2% lower to 1.635 million units from 1.639 million units. Single-family permits rose 7.8% in December to 1.226 million, the highest level since August 2006. Single-family permits have risen for eight straight months. Multi-family permits fell 3.0% in December to 483,000.

After a sharp drop in housing activity last spring as the early stage of the pandemic shut down much of the economy, the housing market has rebounded and is supporting overall economic growth. Extremely low mortgage rates caused by the Fed’s stimulus programs and strong consumer balance sheets will support housing demand in 2021. The housing sector is a catalyst for many vital parts of the economy-e.g. banking, manufacturing and consumer spending-and an improving residential construction sector will boost the overall economy in 2021.

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