Construction Stalls, but Permits Promising

Compared to December, construction disappointed in January, the Commerce Department reported this week. Approvals, however, resurged significantly.

The Breakdown

Housing Starts: 1.57 million (-3.6% month-over-month, +21.4% year-over-year)

Multifamily Starts: 547,000

Single-Family Starts: 1.01 million

Building Permits: 1.55 million (+9.2% month-over-month, +17.9% year-over-year)

Multifamily Permits: 522,000

Single-Family Permits: 987,000

Completions: 1.28 million (-3.3% month-over-month, +1.5% year-over-year)

Multifamily Completions: 397,000

Single-Family Completions: 877,000

What the Industry’s Saying

“The housing market is still experiencing supply shortages in many areas, but January’s residential construction data show yet another step in the right direction. Following a surge of activity in December, housing starts pulled back slightly in January, but the current pace is still over 1.5 million units—remaining close to the highest levels since 2006. Single-family starts decreased last month, but exceeded an annual pace of 1 million units for the second month in a row, and the first time since 2007…In a promising development for new housing supply levels, single-family permits increased for the third month and to the highest level since 2007…The success of the spring buying season greatly depends on how much new and existing inventory is on the market.” – Joel Kan, Associate Vice President of Economic and Industry Forecasting, Mortgage Bankers Association

“While the solid pace for residential construction continues, favorable weather conditions may have accelerated production in the winter months. At the same time, the growth in permits is a harbinger that the market will continue to move forward in the coming months even as builders grapple with supply-side issues like excessive regulations, labor shortages and rising material costs.” – Danushka Nanayakkara-Skillington, Assistant Vice President of Forecasting and Analysis, National Association of Home Builders

“The latest month’s decline in housing starts is nothing to be concerned about…What is important is the trend line, which is clearly on an upward path. Higher housing permit issuances are also a positive indicator for even greater production in the months ahead. Housing starts of 1.57 million units (annualized rate) in January following 1.63 million in December marks the only two months in over a decade where activity has been above the historical average of 1.5 million a year. More construction will mean more housing inventory for consumers in the later months of this year. Spring months could still be quite tough for buyers, since it takes time to convert housing starts into actual housing completions. As trade-up buyers move into these new completed homes in the near future, their existing homes will be released onto the market.” – Lawrence Yun, Chief Economist, National Association of REALTORS®