This story was originally published in Builder.

Housing starts in December fell 8.2 percent from November and 6 percent from the same month a year ago to a seasonally adjusted annual rate of 1.192 million, the Commerce Dept. reported Thursday. The level fell considerably short of Wall Street expectations for a rate of 1.28 million.

Single-family housing starts in December were at a rate of 836,000; this is 11.8 percent (±6.5 percent) below the revised November figure of 948,000.

Building permits in December were at a seasonally adjusted annual rate of 1.302 million, 0.1 percent below the revised November rate of 1.303 million but 2.8 percent above the December 2016 rate of 1.266 million. Single-family authorizations in December were at a rate of 881,000, 1.8 percent above the revised November figure of 865,000.

Lawrence Yun, chief economist for the National Association of Realtors, was not impressed. "The latest decline in the volatile housing starts data is disappointing, but surely not lasting. New home construction still closed out 2017 as expected, with 1.2 million units—the best since 2007. Given that the sales for both new and existing homes sold briskly throughout last year and at notably higher prices, housing starts should easily surpass 1.3 million in 2018. 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. That would be a good trend for housing affordability, especially in a likely higher mortgage rate environment later this year."

Yun added, "The new tax bill, which caps mortgage interest and property tax deductions, was not the chief reason for last month’s decline. About 95 percent of new homes are priced below $750,000. Still, home builders will do well to focus on moderately-priced homes catering to first-time buyers. The entry-level price point is in dire need of new inventory heading into the spring."

This story was originally published in Builder.