Housing starts in January were at a seasonally adjusted annual rate of 1.326 million, up 9.7% compared with 1.209 million in December and up from 1.236 million in January 2017, according to estimates released by the U.S. Census Bureau and U.S. Department of Housing and Urban Development.
Most of the increase was attributable to starts of multifamily (five units or more per building) homes.
Starts of single-family homes were at a rate of 877,000, an increase of 3.7% compared with a revised 846,000 in December. Starts of multifamily units were at 431,000, up 19.7% compared with about 360,000 in December.
Regionally, combined single-family and multifamily housing production increased 45.5% in the Northeast, 10.7% in the West and 9.3% in the South. Starts fell 10.2% in the Midwest.
Nationally, building permits were at a seasonally adjusted annual rate of 1.396 million, an increase of 7.4% compared with a revised rate of 1.3 million in December and an increase of 7.4% compared with 1.3 million in January 2017.
Once again, most of the increase in building permits was for multifamily properties.
Permits for single-family homes were at a rate of 866,000, a decrease of 1.7% compared with a revised 881,000 in December. Permits for multifamily dwellings were at a rate of about 479,000, an increase of 25.4% compared with 382,000 in December.
In a statement, Mark Fleming, chief economist for First American, says the increase in new construction is a welcome sign for a supply-strained housing market.
“Builders broke ground on more homes [in January] compared to last year,” Fleming says. “Housing completions – the number of net new homes added to the housing stock – also increased dramatically compared with a year ago. This signals some relief for the supply shortage.
“The rise in permits – the leading indicator of housing starts – in conjunction with the rise in construction employment this month signals an upward trajectory for housing starts in 2018,” he adds. “Based on the data this month, construction employment has eased as a headwind to housing starts.”
Fleming points out that as more construction jobs are added to the labor market, the more home builders can meet pent-up demand.
“The employment situation report, released earlier this month, reported an increase of 5,000 residential construction jobs between December 2017 and January 2018,” he says. “The number of residential construction jobs is now 1.3 percent higher than a year ago. The growth in residential construction jobs supports further improvement in the pace of home building because building a home does not readily lend itself to outsourcing and automation.”
In a separate statement, Randy Noel, chairman of the National Association of Home Builders (NAHB), says the rise in housing starts “is in line with our reports of solid builder confidence in the housing market.”
“A pro-business regulatory climate and increasing housing demand are boosting builders’ optimism, even as they continue to face supply-side hurdles such as rising construction material prices and access to lots and labor,” Noel says.
“Demand for owner-occupied housing is rising due to favorable demographic tailwinds and a healthy labor market,” adds Robert Dietz, chief economist for NAHB. “Increases in after-tax incomes should help prospective buyers save for a down payment on a home. As consumers continue to enter the single-family market, we should see builders increase production to meet this demand.”
