U.S. housing starts dropped 3.8 percent in January, with the sharpest declines surfacing in the Midwest, according to the Census Bureau. Experts speculate frosty winter weather may be the culprit for the decline. As nasty weather delayed thousands of building projects across the country, this dip is a temporary setback for a market that was cruising smoothly forward.
January is the slowest month of the year for new construction, so it’s not a good month to judge near-term trends,” says realtor.com® Chief Economist Jonathan Smoke. “The key findings from [the CB] report is that month-to-month we’re seeing little change in new construction, but year-over-year there is solid growth. In addition, permits remain higher than starts, which is a good sign for expansion ahead.”
According to the Census Bureau, single-family housing completions in January were at a rate of 693,000; this is 1.4 percent (±10.2 percent) below the revised December rate of 703,000. The January rate for units in buildings with five units or more was 351,000.
“Seasonal weather and the recent uncertainty in the stock market are likely explanations for the decline in January housing starts,” says Quicken Loans Vice President Bill Banfield. “Taking a step back to look at year-over-year growth, we continue to see healthy and steady gains. It should be noted that near record low mortgage rates and increased credit availability should give a boost to potential homebuyers as we move through the winter months.”
Privately-owned housing completions in January were at a seasonally adjusted annual rate of 1,057,000. This is 2.0 percent (±9.3 percent) above the revised December estimate of 1,036,000 and is 8.4 percent (±13.2 percent) above the January 2015 rate of 975,000.
“Despite the weaker than expected January readings, the trends affirm our view of solid but not record breaking growth in 2016,” says Smoke. “Demand for housing remains robust as a result of strong household formation. We expect total starts to grow to 1.23 million in 2016, which would be an increase of 11 percent over the final number reported for 2015. 1.23 million starts will be the highest year for starts since 2007.”
For more information, visit www.census.gov.