US homebuilding activity flattens in December, but new highs expected

US homebuilding activity eased in December after hitting record levels during the month before, a closely-followed gauge for the sector revealed.

The National Association of Homebuilders activity index fell from a reading of 90 for November to 86 in December.

Economists had penciled-in a reading of 88.

Despite the flattening in activity, Ian Shepherdson at Pantheon Macroeconomics was confident it would not turn into an outright decline "anytime soon".

Shepherdson pointed to the 100 basis point drop in mortgage rates over the preceding year to back up his thesis, arguing they remained "very attractive" to people qualifying for the benchmark rate, which was below 3%.

"Indeed, we think home sales are likely to rise to new cycle highs next spring, once Covid recedes," he said.

"In the meantime, the lack of inventory means that prices will continue to rise rapidly, and homebuilders still have some catching-up to do."