Sharp decline in US housing starts for November

A key gauge of activity in the US homebuilding sector weakened in November as ground was broken on a much lower number of multi-unit properties.

US housing starts were running at an annualised pace of 1.09m, 18.7% below the previous month's figure and 6.9% lower than in the same month one year ago, according to the Department of Commerce.

Economists had penciled in a month-on-month decline of just 6.8% for starts.

However, whereas starts for single-family homes decreased by 4.1% over the month to reach 828,000, those for building with five units or more fell by 43.9% to 259,000.

Activity was weakest in the Northeast, where starts plummeted by 52.1% when compared to October's pace.

Permits to begin construction, a leading indicator for activity in the sector, decreased by 4.7% over the month to reach 1.201m, which was worse the 1.8% anticipated by economists.

Nonetheless, permits for single-family homes rose by 0.5% on the month to 778,000.

"Housing starts declined 19% to an annualized 1090k in November, continuing on the extreme volatility of the last few months due to swings in the multifamily sector. Looking past these recent swings, the six-month moving average of housing starts is 1177k, only slightly better than a year ago as starts have moved sideways over the last year. The housing market has disappointed in 2016, but it is still well below potential with plenty of room for improvement.

"[...] The expectation is to see a solid gain in residential investment this quarter - which won’t be too hard following the very slow pace of activity over the last two quarters - then for activity to slow early next year due to the higher rates. Further out, strong household fundamentals, robust economic growth and the dearth of for-sale homes should overcome headwinds," said Roiana Reid at Berenberg.