Housing starts dropped 9.8% in January compared with December as builders reacted to mortgage rates nearing 7% and the looming possibility of tariffs that could increase the cost of imported home construction materials.
Starts fell to a seasonally adjusted annual rate of 1.366 million – down from 1.515 million the previous month.
Year-over-year that’s a drop of 0.7% compared with January 2024 when the rate was 1.376 million, according to estimates from the U.S. Census Bureau.
Starts of single-family homes were at an annual rate of 993,000, down 8.4% compared with December.
Starts of multifamily properties were at a rate of 355,000, down 11% compared with the previous month.
Regionally, and month-over-month, combined single-family and multifamily starts dropped 27.6% in the Northeast, 10.4% in the Midwest, 23.3% in the South and 42.3% in the West.
Building permits, however, increased slightly. They were up 0.1% in January compared with December to reach an annual rate of 1.483 million.
Year-over-year, permits were down 1.7%.
Permits for single-family homes in January were at a rate of 996,000 – flat compared with December.
Permits for multifamily dwellings were at a rate of 427,000, down 1.4% compared with the month prior.
Regionally, permits dropped 6.1% in the Northeast and 0.1% in the South, but were up 1.8% in the Midwest and 2.3% in the West, compared with December.
Housing completions were at a seasonally adjusted annual rate of 1.651 million, which is an increase of 7.6% compared with December and up 9.8% compared with January 2024.
“As mirrored in our latest builder survey, high construction costs, elevated mortgage rates and challenging housing affordability conditions are causing builders to approach the market with caution,” says Carl Harris, chairman of the National Association of Home Builders (NAHB), in a statement. “The uncertain policy environment in terms of a better regulatory climate and impending tariffs offers both upside and downside risks in the near-term.”
“The single-family home building market is facing competing concerns and opportunities for 2025,” adds Robert Dietz, chief economist for NAHB. “Given persistent affordability concerns, reducing inefficient regulatory costs would offer the best policy path to improve attainable housing supply and bring down shelter inflation.”
In a separate statement, Odeta Kushi, deputy chief economist for First American, says “a colder than usual January,” along with higher mortgages rates and concerns over the supply of building materials, led to builder pessimism.
“Permits were flat on a monthly basis reflecting builder concern,” Kushi says. “Builder sentiment dipped in February to the lowest level since September. Importantly, optimism about single-family sales expectations for the next six months plummeted, dropping 13 points into negative territory. This marks the largest one-month decline since the early months of the COVID-19 pandemic. Apart from the early months of the pandemic, it is the biggest drop in the history of the series, which dates back to 1985.”
Photo: Kier in Sight Archives