Housing starts were at a seasonally adjusted annual rate of 1.58 million in January – a decrease of 6.0% compared with December and down 2.3% compared with January 2020, according to estimates from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.
Regionally, and month over month, housing starts increased 2.3% in the Northeast, but fell 12.3% in the Midwest, 11.4% in the West and 2.5% in the South.
The decrease is in keeping with seasonal trends.
Starts of single-family homes were at a rate of 1.162 million, a decrease of 12.2% compared with December. Starts of multifamily dwellings (five units or more per building) were at a rate of 402,000, an increase of 16.2% compared with December.
Building permits, however, increased both month-over-month and year-over-year. They were at a seasonally adjusted annual rate of 1.88 million, up 10.4% compared with December and up 22.5% compared with January 2020.
Permits for single-family homes were at a rate of 1.27 million, up 3.8% compared with December. Authorizations for multifamily units were at a rate of 557,000, up 28% compared with December.
The annual rate of housing completions dipped 2.3% compared with the previous month but was up 2.4% compared with January 2020.
“Despite a modest month-over-over decline, single-family housing starts are up 17.5 percent from one year ago,” says Odeta Kushi, deputy chief economist for First American, in a statement. “Single-family permits, a leading indicator of future starts, are up nearly 30 percent from one year ago. It’s still not enough to significantly narrow the gap between supply and demand, but it’s a step in the right direction.”
Kushi says there is reason to be optimistic about the housing market as spring approaches.
“Strong buyer demand lifted builder sentiment in the February survey, after declines in December and January,” she says. “Low rates and the ongoing wave of millennial demand for homes, continue to boost demand and builders are responding.”
Unfortunately, “builders still face several supply-side headwinds, including high costs for materials, such as lumber – which set a price record in mid-February – a dearth of affordable lots and costly regulations,” Kushi adds. “These headwinds could slow home-building momentum in the months to come. The devastating winter storm Uri will likely result in a temporary slowdown in building in Texas. Something to watch in future reports.”
“Concerns over higher lumber prices produced softness for the housing market amid solid buyer traffic at the start of the year,” says Chuck Fowke, chairman of the National Association of Home Builders. “With the cost of building materials rising at a rapid pace, the challenge for builders is to keep home prices at an affordable level for buyers even as the regulatory policy environment may become more challenging.”
“The weakness in housing starts in January is consistent with our recent builder surveys,” adds Robert Dietz, chief economist for NAHB. “Builders report concerns over increasing lumber and other construction costs and delays in obtaining building materials.
“Rising interest rates will also erode housing affordability in 2021, as existing home inventories remain low,” Dietz says. “It’s also worth noting that the number of single-family homes permitted but not started construction jumped to 114,000 units in January. This is 9.6 percent higher than December and 28.1 percent higher than a year ago, as building material cost increases and delays slow some home building.”
Photo: Todd Kent