Housing Starts Weakened in January


Housing starts slowed in January to an annual pace of 1.31 million, down 4.5% compared with December and down 21.4% compared with January 2022, according to the U.S. Census Bureau and U.S. Department of Housing and Urban Development.

Starts of single‐family homes were at a rate of 841,000, down 4.3% compared with December.

Starts of multifamily homes (five units or more per building) were at a rate of 457,000, down 5.4% compared with December.

Building permits barely eked out an increase. They were at a seasonally adjusted annual rate of 1.339 million, up 0.1% compared with December. However, permits were down 27.3% compared with January 2022.

Permits for single‐family homes were at a rate of 718,000, a decrease of 1.8% compared with December.

Permits for multifamily dwellings were at a rate of 563,000 in January, an increase of 0.5%.

Housing completions were at a seasonally adjusted annual rate of 1.406 million, an increase of 1.0% compared with December.

“Builders will likely continue to focus on completing existing projects, rather than starting new ones,” says Odesa Kushi, deputy chief economist for First American, in a statement. “As new completed home inventory rises, it will provide some much-needed relief to a supply-starved market.”

Kushi notes that homebuilder sentiment increased for the second consecutive month in February.

“Conditions are still considered ‘poor’ overall, but the improvement signals that builders are feeling cautiously optimistic about the months to come,” she says.

“Builders still face a difficult market as affordability challenges and supply-side headwinds persist,” Kushi adds. “While mortgage rates have trended down over the last three months thanks to favorable inflation data, rates increased recently due to market expectations that inflation will persist, thereby requiring the Federal Reserve to remain restrictive for longer. Even so, builders are hoping that we’re past the mortgage rate peak and can look for some mortgage rate stability in the months to come.”

It should also be noted that the decrease is in keeping with seasonal patterns.

“Housing construction weakened in January as ongoing affordability conditions fueled by high mortgage rates and building material costs challenged the market,” says Alicia Huey, chairman of the National Association of Home Builders (NAHB), in a statement. “And while a recent two-month upturn in builder sentiment indicates a turning point for single-family construction could take hold in the months ahead, policymakers need to fix the supply chain for building materials to ensure builders can add the additional inventory the housing market desperately needs.”

“As completions continue to outpace construction starts, this marks the eighth straight monthly decline for the number of single-family homes under construction, which has fallen to 752,000,” adds Danushka Nanayakkara-Skillington, assistant vice president for forecasting and analysis for NAHB. “Meanwhile, the number of apartments under construction stands at the highest level since November 1973, which means a slowdown for apartment starts is approaching.”

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