U.S. homebuilding activity fell this past January after an unseasonably warm December helped inflate housing starts, dropping to a seasonally adjusted annual rate of 1.567 million units.
That’s a decrease of 3.6% from December 2019, which had its own figure upwardly revised to 1.626 million units from an originally reported 1.608 million. The numbers come from the latest joint report from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, which release home-construction data every month.
The January decline ended a run of three consecutive monthly increases, although the decline was more moderate than expected. CNBC reported that economists polled by Reuters had predicted the pace to fall to 1.425 million in January.
“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,” said Joel Kan, associate vice president of economic and industry forecasting for the Mortgage Bankers Association. “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.”
Housing starts remained well above last year’s levels, with January’s rate 21.4% higher than the January 2019 rate of 1.291 million units. Similar to overall starts, single-family starts decreased on a monthly basis but exceeded an annual pace of 1 million units for the second month in a row, the first time that has happened since 2007.
And building permits surged to a seasonally adjusted annual rate of 1.551 million, up 9.2% from December 2019 and 17.9% from January 2019. That rate, boosted by increases in both single-family and multifamily authorizations, is at its highest level since March 2007.
“The housing market – especially single-family – has regained momentum. January’s permits data provided an encouraging sign with over 1.55 million housing permits,” said Odeta Kushi, deputy chief economist for First American Financial Corp. “Even better is the single-family permits data, which is the highest it has been since 2007 and 20% higher than one year ago. Permits are a leading indicator of future housing starts, so this is another nod to the expected strength of the housing market in 2020.”
All of this is good news for the nation’s housing inventory, which has continued to hold back sales due to limited supply.
“Homebuilders are continuing to ramp up production to meet the demand from potential buyers and mild winter weather is helping some of the increased activity in the Midwest,” Kan said. “The success of the spring buying season greatly depends on how much new and existing inventory is on the market.”
The sunny report has economists bullish about the state of the housing market with the 2020 spring buying season on the horizon.
“Taken altogether, the past few months represent easily the best sustained performance by builders since well before the Great Recession,” said Zillow economist Jeff Tucker, “and there’s currently little reason to suspect this can’t continue.”
“The housing market is on solid footing,” Kushi said. “Demographic demand only continues to strengthen as 4.8 million millennials turn 30 this year (approaching peak homebuying age), and low borrowing costs and a strong labor market boost purchasing power. Finally, the other half of the equation, supply, is beginning to accelerate to keep up with the pace of household formation.”