New home construction slowed at the end of 2023
The annual pace of new home construction in the US
pulled back in December after soaring in November
despite a historic shortage of housing inventory and falling
mortgage rates. Housing starts came down by 4.3% in
December compared to the previous month, according to
US Census Bureau data. Starts fell to a seasonally adjusted
annual rate of 1.46 million units last month, dropping from
November’s pace of 1.56 million.
Still, homebuilding has improved from a year ago, with
housing starts up 7.6% from the rate of 1.357 million units
in December 2022.
“Even though construction started slowing at the end of
2023 there are tailwinds with mortgage rates trending
lower that will help construction this year,” said Kelly
Mangold of RCLCO Real Estate Consulting.
While average mortgage rates have moved ticked higher in
late December they have settled at around 6.6%, one full
percentage point lower than last year’s peak of 7.79%,
according to Freddie Mac. Rates are expected to continue
to fall slowly in 2024.
Additionally, homebuilder sentiment in January is strong
according to a separate survey which showed optimism
about the new construction market is the highest it has
been since September. New construction has also
benefited from the low inventory of homes on the resale
market, where homeowners are reluctant to sell and give
up their ultra-low mortgage rate for much higher
Canadian housing starts rebounded in December after a
surprise decline in the prior month but ended the year
down from 2022 at a time when the deficit of housing
units is at or near a record high. Housing starts across
Canada came in at a seasonally adjusted annual rate of
249,255 units in December, an 18% increase from the
For 2023, actual housing starts fell 7% to 223,513 units
from the prior year, and the federal housing agency
attributed the weakness to a sharp drop-off in construction
of single-detached homes. The results emerge as Canada
faces an acute housing shortage, in part due to some of the
fastest population growth in the world.
2023 was slowest year for home sales
The National Association of Realtors reported that existing
US home sales totaled 4.09 million last year, an 18.7%
decline from 2022. That is the weakest year for home sales
since 1995 and the biggest annual decline since 2007, the
start of the housing slump of the late 2000s.
Last year’s home sales slump echoes the nearly 18%
annual decline in 2022, when mortgage rates began rising,
eventually more than doubling by the end of the year. Still,
a pullback in mortgage rates since late last year, and
forecasts calling for further rate reductions this year, is
fueling hopes that home sales will begin to bounce back
from their dismal showing in 2023.
Existing home sales slipped 1.0% in December to a
seasonally adjusted annual rate of 3.78 million units, the
lowest level since August 2010. Economists polled by
Reuters had forecast home sales would be unchanged.
“The latest month’s sales look to be the bottom before
inevitably turning higher in the new year,” said Lawrence
Yun, the NAR's chief economist. “Mortgage rates are
meaningfully lower compared to just two months ago, and
more inventory is expected to appear on the market in
At 470,000 units, existing-home sales in the Northeast
were unchanged from November but down 9.6% from
December 2022. In the Midwest, existing-home sales
retracted 4.3% from the prior month to an annual rate of
900,000 in December, down 10.9% from last year.
Existing-home sales in the South descended 2.8% from
November to an annual rate of 1.72 million in December,
a decrease of 4.4% from the prior year. In the West,
existing-home sales grew 7.8% from a month ago to an
annual rate of 690,000 in December but were down 1.4%
from one year before.
(Sources: National Association of Realtors, Associated Press, Reuters)
US builder confidence shows sharp rise
Mortgage rates well under 7% over the past month have
led to a sharp increase in US builder confidence to begin
the New Year.
Builder confidence in the market for newly built single-
family homes climbed seven points (to 44) in January,
according to the National Association of Home Builders
(NAHB)/Wells Fargo Housing Market Index (HMI). This
second consecutive monthly increase in builder confidence
closely tracks with a period of falling interest rates.
“Lower interest rates improved housing affordability
conditions this past month, bringing some buyers back into
the market after being sidelined in the fall by higher
borrowing costs,” NAHB Chairman Alicia Huey stated in
“Single-family starts are expected to grow in 2024, adding
much needed inventory to the market. However, builders
will face growing challenges with building material cost
and availability, as well as lot supply.”
Job market continues to excel through end of 2023
The US labor market closed out 2023 in strong shape as
the pace of hiring was even more powerful than expected,
the US Department of Labor reported.
December’s jobs report showed employers added 216,000
positions for the month while the unemployment rate held
at 3.7%. Payroll growth showed a sizeable gain from
November’s downwardly revised 173,000. October also
was revised lower, to 105,000 from 150,000, indicating a
slightly less robust picture for growth in the fourth quarter.
The report, along with revisions to previous months’
counts, brought 2023 job gains to 2.7 million, or a monthly
average of 225,000, down from 4.8 million, or 399,000 a
month, in 2022.
“Jobs growth remains as resilient as ever, validating
growing skepticism that the economy will be ready for
policy rate cuts as early as March,” said Seema Shah, chief
global strategist at Principal Asset Management. “Indeed,
the recent run of labor market data generally points in one
In December, construction employment continued to trend
up (+17,000). Construction added an average of 16,000
jobs per month in 2023, similar to the 2022 average
monthly gain of 22,000. Employment showed little change
over the month in manufacturing and other major
Consumer confidence on the rise
US consumer sentiment improved in January to the
highest level since the summer of 2021 amid optimism
over the outlook for inflation and household incomes. The
University of Michigan's preliminary reading on the
overall index of consumer sentiment came in at 78.8 this
month, the highest reading since July 2021, compared to
69.7 in December.
"Consumer views were supported by confidence that
inflation has turned a corner and strengthening income
expectations," said Surveys of Consumers Director Joanne
Manufacturing sector shrinks for 14th straight month
Economic activity in the manufacturing sector contracted
in December for the 14th consecutive month say the
nation's supply executives in the latest Manufacturing ISM
Report On Business. The ISM index registered 47.4
percent in December, up 0.7 percentage point from the
46.7 percent recorded in November. An index rating above
50 indicates growth. Both the Wood Products and the
Furniture and Related Products sectors reported
contraction in December.
One respondent in the wood products sector reported that,
“higher financing costs have diminished demand for
residential investment. Customers are delaying a portion
of their plans until borrowing costs are reduced. We are
impacted with reduced new orders, a diminished backlog
of orders and uncertain short-term demand for products
Domestic sales of floor coverings showing signs of
US square foot sales of floor coverings is projected to
increase by 2.5% in the first quarter of 2024, according to
Catalina Research. This follows a 1.9% gain in the fourth
quarter of 2023. Catalina came to this conclusion based on
an estimated 4% to 5% increase in US floor coverings
square foot imports in the fourth quarter of 2023. This data
is available in the December issue of the Catalina Floor
Coverings Quarterly Update. These increases came after
five quarters of declining square foot sales. The upturn in
square foot floor coverings sales reflects a moderating
decline in US housing demand.
Canada challenges US softwood tariffs decision
Canada is challenging the US decision late last year to
maintain duties on exports of Canadian softwood lumber,
Trade Minister Mary Ng said in a statement on January 18.
Ng said Canada had launched its challenge under the US-
Mexico-Canada free trade deal. The two countries have
been arguing for decades about the lumber exports, which
US producers say are unfairly subsidized.
In July 2023, the US Department of Commerce released
its final determination of a combined anti-subsidy and
anti-dumping duty rate of 7.99% in the fourth annual
review of traded Canadian softwood lumber imports into
the United States. The review covers lumber imported in
the calendar year 2021.