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Housing starts and inventory continue to backslide in December 2017

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With available inventory still on a downward spiral around the country, the end of 2017 saw a less than optimistic outcome for housing starts, with the number of homes that went under construction in December falling 8.2 percent from November, according to the U.S. Commerce Department.

The total number of single-family housing starts leveled out to 836,000 by the end of December, which was 11.8 percent less than November and 6 percent below December 2016. On top of that, there was also a slight dip in building permits, with 1.3 million reported for the whole month, down 0.1 percent from November but 2.8 percent more than December 2016. Single-family authorizations, however, were on the rise, increasing 1.8 percent from November.

“Despite considerable demand all year, pending sales have lost a step in recent months because low supply is pushing prices higher and making homebuying less affordable in several parts of the country,” said Lawrence Yun, chief economist for the National Association of Realtors.

He added that more homes need to be built at moderate prices for first-time home buyers, an eager but hesitant demographic that is hamstrung by lack of affordable entry-level price points. Still, he remains optimistic for inventory and housing starts in the new year but says changes need to be made in the regulations surrounding both factors.

“The latest decline in the volatile housing starts data is disappointing, but surely not lasting,” Yun said. “Some relaxing of regulatory rules in small-sized community banks will help improve credit conditions for developers. Should more construction come about, the much-needed additional inventory will help calm home price appreciation.”

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