January Housing Starts Down 2.6%, But Permit Issuance Looks Decent

Housing starts in January were at a seasonally adjusted annual rate of about 1.246 million, a decrease of 2.6% compared with a revised December rate of about 1.279 million but an increase of 10.5% compared with a rate of 1.128 million seen in January 2016, according to estimates released by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.

The decrease in January – which is normally a slow month for new home construction – follows an unexpected increase of 11.3% in December, which was one of the strongest monthly jumps in new home construction seen in 2016. Most of that increase, however, was in multifamily starts.

Still, 2016 was a much better year for housing starts than 2015, and overall production seems to be improving.

Starts of single-family homes in January were at a rate of 823,000, an increase of 1.9% compared with a revised December figure of 808,000. Starts of multifamily units (five or more units per building) were at a rate of about 421,000, a decrease of 7.9% compared with about 457,000 in December.

New construction appears to be poised for an increase in the coming months: Building permits were at a seasonally adjusted annual rate of 1.285 million, an increase of 4.6% compared with the revised December rate of 1.228 million and an increase of 8.2% compared with 1.188 million in January 2016.

Permits for single-family homes were at a rate of about 808,000, a decrease of 2.7% compared with a revised 830,000 in December. Permits for multifamily dwellings were at a rate of about 446,000, an increase of 23.5% compared with 361,000 in December.

In a statement, Granger MacDonald, chairman of the National Association of Home Builders (NAHB), characterized the figures as “a settling of housing production” that “is in line with what we are hearing from builders.”

MacDonald says home builders “are largely optimistic about current market conditions but still face supply-side headwinds and regulatory hurdles.”

“Some pullback in housing production is unsurprising after an overly strong multifamily reading last month,” adds Robert Dietz, chief economist for NAHB. “As we move forward in 2017, we can expect the multifamily sector to continue to stabilize and single-family production to move forward at a gradual but consistent pace.”


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