Housing starts tumbled in January, falling 14.8% compared with December to reach a seasonally adjusted annual rate of 1.331 million, according to estimates from the U.S. Census Bureau and U.S. Department of Housing and Urban Development.
That’s down 0.7% compared with January 2023.
Starts of detached single‐family homes were at an annual rate of 1.004 million, down 4.7% compared with December.
Starts of multifamily homes (five units or more per building) were at a rate of 314,000, down 35.8% compared with the previous month.
Building permits also decreased, falling 1.5% compared with December to an annual rate of 1.47 million.
Year-over-year, however, permits were up 8.6% compared with January 2023.
Permits for single‐family homes in January were at a rate of 1.015 million, an increase of 1.6% compared with December.
Permits for multifamily dwellings were at a rate of 405,000, down 9% compared with December.
Housing completions were at a seasonally adjusted annual rate of 1.416 million, down 8.1% compared with the month prior.
The one bright spot in the report was single-family permits, which reached the highest level since May 2022.
“This is consistent with the latest builder survey, which shows an increase in builder sentiment and future sales expectations,” says Odeta Kushi, deputy chief economist for First American, in a statement. “The uptick in single-family permits suggests cautious optimism on the part of builders, and suggests that the single-family market is poised for growth. Single-family completions decreased 16 percent compared with last month and was also down 16 percent from one year ago.
“The improvement in builder sentiment has been driven by the gradual decline in mortgage rates since the fall of last year,” Kushi says. “Additionally, builders continue to benefit from a lack of resale inventory. They also can offer incentives, such as mortgage rate buydowns or even price cuts, to entice buyers. When there are no suitable existing homes for sale, a new home at the right price can be a good alternative.”
As Kushi notes, there is a risk that the recent improvements in the housing market will stall, now that mortgage rates are back on the rise again.
“But this should be short-lived, as the expectation for Fed rate cuts remains, which should bring long-term rates down again,” she says.
“The outlook for the single-family, new-home market is positive, but challenges remain,” Kushi adds. “Potential home buyers are sensitive to mortgage rate fluctuations, while builders continue to face headwinds, such as higher construction costs and shortages of buildable lots and skilled labor.”
Photo: Avel Chuklanov