Housing Starts Continued to Trend Higher in January

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Housing starts continued to climb year-over-year in January, reaching a seasonally adjusted annual rate of 1.567 million, according to estimates from the U.S. Census Bureau and U.S. Department of Housing and Urban Development.

That’s a decrease of 3.6% compared with an adjusted annual rate of 1.626 million in December but an increase of 21.4% compared with a rate of 1.291 million January 2019.

Starts of single‐family homes were at a rate of 1.010 million, a decrease of 5.9% compared with 1.073 million the previous month.

Starts of multifamily dwellings (five units or more per building) were at an annual rate of 547,000, an increase of 3.0% compared with 531,000 in January 2019.

Building permits were up month-over-month and year-over-year. They were at a seasonally adjusted annual rate of 1.551 million, an increase of 9.2% compared with 1.420 million in December and an increase of 17.9% compared with 1.316 million in January 2019.

Permits for single‐family homes were at a rate of 987,000, an increase of 6.4% compared with 928,000 in December.

Permits for multifamily homes were at a rate of 522,000, up 15.2% compared with 453,000 the previous month. 

Housing completions were at a seasonally adjusted annual rate of 1.280 million, down 3.3% compared with 1.323 million in December but up 1.5% compared with 1.261 million in January 2019.

Completions of single‐family homes in January were at a rate of 877,000, a decrease of 3.5% compared with 909,000 the previous month.

Completions of multifamily units were at a rate of 397,000, down 2.2% compared with 406,000 in December.

The overall increase in construction activity is a continuation of the trend seen at the end of 2019 and is welcome news for the housing and mortgage industries.

“January’s decrease in single-family home construction came on the heels of a strong December that was helped by warmer weather,” says Bill Banfield, executive vice president of capital markets for Quicken Loans, in a statement. “With two strong months, it is clear warmer weather has helped the housing market earn some extra credit points. This could help generate positive momentum heading into the spring home buying season.”

Odeta Kushi, deputy chief economist for First American, says the increase in permit activity is “an encouraging sign.”

“Even better is the single-family permits data, which is the highest it’s been since 2007, and 20 percent higher than one year ago,” Kushi says in a statement. “Permits are a leading indicator of future housing starts, so this is another nod to the expected strength of the housing market in 2020.”

Kushi says “the housing market is on solid footing.”

“Demographic demand only continues to strengthen as 4.8 million millennials turn 30 this year – approaching peak home-buying age – and low borrowing costs and a strong labor market boost purchasing power,” she says. “Finally, the other half of the equation, supply, is beginning to accelerate to keep up with the pace of household formation.”

Also showing promise that home builders will continue to ramp up production is that home builder confidence for the last three months has been the highest since 1999.

“Builders are responding to high demand, limited existing inventory, and low borrowing costs,” Kushi says.

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