Housing starts fall back in January on multifamily volatility

Dive Brief:

  • Housing starts dipped 2.6% in January to a seasonally adjusted annual rate of 1.246 million from December's upward-revised estimate of 1.279 million, the Commerce Department reported Thursday. January's figure is 10.5% ahead of the January 2016 rate.

  • Building permit authorizations, an indicator of future construction activity, rose slightly from December's upward-adjusted rate of 1.228 million to 1.285 million in January and came in 8.2% above the year-ago mark.

  • Single-family starts inched up 1.9% to 823,000 from December's upward-revised figure of 808,000, and they were 6.2% ahead of a year ago. Multifamily starts declined 7.9% from December's surge to a rate of 421,000 starts in January but are up a solid 25.7% from a year earlier.

Dive Insight:

Despite the decline, January's report came in roughly on par with analyst expectations, according to MarketWatch, with the single-family category turning up during the month following a drop-off in December. Meanwhile, the multifamily category continued to cool from its post-recession boom.

While the uptick in single-family construction and new permit authorizations bodes well for building activity, builder confidence in the market for new single-family housing fell back in February. The National Association of Home Builders/Wells Fargo Housing Market Index slipped two points to a reading of 65 for the month — still well above the breakeven threshold of 50. February marked the second-consecutive month in which all three HMI markers decreased, signaling a slow start to 2017 amid concerns over rising mortgage rates, lot and labor shortages, and policy uncertainty.

The National Association of Home Builders credited January's decline to volatility in the multifamily market, and it expects the single-family sector to continue to grow this year. However, it called out decreases in single-family starts and permits last month in the West region, where tight inventory is driving prices up, as a source of additional pressure on that market.

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Filed Under: Residential Building Economy
Top image credit: Renaude Hatsedakis