U.S. Housing Starts Pull Back Sharply From 14-Year High In January
After reporting a sharp increase in new residential construction in the U.S. in the previous month, the Commerce Department released a report on Thursday showing housing starts pulled back by much more than expected in the month of January.
The Commerce Department said housing starts tumbled by 6.0 percent to an annual rate of 1.580 million in January after soaring by 8.2 percent to an upwardly revised rate of 1.680 million in December.
Economists had expected housing stocks to decrease by 0.7 percent to a rate of 1.658 million from the 1.669 million originally reported for the previous month.
The upwardly revised rate seen in December reflected the highest annual rate of housing starts since September of 2006.
The steep drop in housing starts came as single-family starts plunged by 12.2 percent to a rate of 1.162 million, more than offsetting a 17.1 percent spike in multi-family starts to a rate of 418,000.
Meanwhile, the report also said building permits skyrocketed by 10.4 percent to an annual rate of 1.881 million in January after jumping by 4.2 percent to a revised rate of 1.704 million in December.
Building permits, an indicator of future housing demand, had been expected to slump by 1.8 percent to a rate of 1.678 million from the 1.709 million originally reported for the previous month.
With the unexpected increase, building permits reached their highest annual rate since hitting 1.905 million in May of 2006.
Single-family permits jumped by 3.8 percent to a rate of 1.269 million, while multi-family permits surged up by 27.2 percent to a rate of 612,000.
“We expect the pace of housing starts to moderate in 2021 as homebuilders confront constraints including high lumber prices and shortages of lots and labor,” said Nancy Vanden Houten, Lead Economist at Oxford Economics.
She added, “However, we still expect recovering demand, low mortgage rates and a shortage of supply to support a healthy rate of new home construction, and the risk may be for further upside surprises.”
On Wednesday, the National Association of Home Builders released a separate report showing homebuilder confidence in the U.S. has unexpectedly seen a modest improvement in the month of February.
The report said the NAHB/Wells Fargo Housing Market Index inched up to 84 in February after falling to 83 in January. Economists had expected the reading to be unchanged from the previous month.
The NAHB said the unexpected uptick in homebuilder confidence came as strong buyer demand helped offset supply chain challenges and a surge in lumber prices.