US home starts gained to best rate since 2006 to close out the housing market's triumphant year

• US housing starts gained 5.8% in December to an adjusted annualized rate of roughly 1.67 million units, the Census Bureau said Thursday.
• The rate is the fastest since 2006 and signals continued strength in the housing sector through the end of last year.
• While multifamily construction lagged, vaccine distribution and economic reopening should lift the segment, Barclays economists said in a research note.

Home starts in the US climbed in December to the fastest pace since 2006 as housing-market activity thrived into the new year.

New residential construction starts gained 5.8% to a seasonally adjusted annual rate of roughly 1.67 million units, according to Census Bureau data published Thursday. The rate sits 5.2% above the year-ago level. Economists surveyed by Bloomberg expected the rate to fall slightly to 1.56 million from November's revised level.

Single-family-unit starts rose 12% to a rate of 1.34 million. Starts for residences in buildings with five units or more fell 15.2% to a rate of 312,000. Permits for new residential units rose 4.5% in December to a rate of 1.71 million, signaling the sector's strength will continue in 2021.

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The unexpected uptick in construction adds to a robust year for the US housing market. The Federal Reserve's pledge to hold interest rates near zero for the foreseeable future dragged mortgage rates to multiple record lows. The cheap borrowing costs fueled a rally in homebuying activity and quickly saw demand outstrip supply.

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The Census Bureau's latest report suggests homebuilders are rushing to counteract the dwindling number of available units. And although apartment construction slowed through 2020 as Americans fled densely populated areas, recent developments stand to lift the lagging segment.

"The approval and administration of a number of vaccines and the prospects of reaching herd immunity by the middle of next year will likely be a boon to multifamily construction," Barclays economists said in a note. The housing sector's resilience should "make a strong contribution" to fourth-quarter economic growth, they added.

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