Housing starts slide, permits soar

Residential construction took a slight step back in January, but overall levels remain at a strong pace.

Total housing starts for January fell 3.6% to a seasonally adjusted annual rate of 1.567 million from a revised December 2019 estimate of 1.626 million, the Commerce Department reported this morning. Starts for December 2019 had previously been reported at 1.608 million.

January’s numbers are 21.4% above the January 2019 rate of 1.291 million.


Single‐family housing starts in January were at a rate of 1.010 million, dropping 5.9% below the revised December figure of 1.073 million.

Housing permits in January climbed 9.2% above the revised December level of 1.420 million to 1.551 million, nearly a 13-year high. This is also 17.9% above the January 2019 rate of 1.32 million.

Single-family permits rose 6.4% to 987,000 from the revised December rate of 928,000. The latest figure is also 6.4% above the revised December figure of 928,000.

“The housing recovery continues, as single-family housing starts have surpassed one million for the second consecutive month and multifamily production has been running above 500,000 for the same period,” said NAHB Chairman Dean Mon, a home builder and developer from Shrewsbury, N.J.

By region, total starts in the Northeast increased 31.9% while single-family starts are up 3.1%. In the Midwest, total starts fell 25.9% as single-family starts declined 15.1%. Total starts in the South dropped 5.4% and single-family starts decreased 12.2%. In the West, total starts are up 1.2% as single-family starts ascended 14.2%.

Permits shot up 34.6% higher in the Northeast, 8.2% higher in the Midwest, 8% higher in the South and 3.1% higher in the West.

“While the solid pace for residential construction continues, favorable weather conditions may have accelerated production in the winter months,” said Nanayakkara-Skillington, NAHB’s assistant vice president of forecasting and analysis. “At the same time, the growth in permits is a harbinger that that 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.”

Lawrence Yun, chief economist of the National Association of Realtors, said that housing continues to head in the right direction.

“The latest month’s decline in housing starts is nothing to be concerned about. This housing data is quite jumpy. 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," Yun said.

"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," Yun noted. "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.”

With mortgage rates remaining at low levels, and strong demand for housing, builder sentiment levels also continue to stand at solid levels.

Builder confidence in the market for newly-built single-family homes edged just one point lower to 74 in February, according to the latest NAHB/Wells Fargo Housing Market Index (HMI), the National Association of Home Builders reported yesterday. The last three monthly readings mark the highest sentiment levels since December 2017.