 | Housing Starts Fell 8.5% in January to 890,000 Units at an Annual Rate |
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| Posted Under: Data Watch • Home Starts • Housing |
Implications: Take the headline drop in housing starts with a huge grain of salt. Although housing starts fell 8.5% in January, that only partially offsets the 15.7% spike upward in December. As we noted last month, December's weather was unusually mild, with the average temperature in the contiguous 48 states tying the highest for any December since the 1950s. As a result, a drop in January was expected. The decline in January was even steeper than the consensus (or we) expected, but all of it was due to the very volatile multi-family sector. Single-family starts hit the highest since 2008. Also, were it not for that tremendous surge in December, the level of starts in January would have been the highest since 2008, even including the drop in multi-family. In other words, the underlying trend remains strong. Single-family starts are up 20% from a year ago, while multi-family starts are up 32.5%. The total number of homes under construction (started, but not yet finished) were up 1.5% in January and are up 26% from a year ago. Building permits increased 1.8% in January and are up 35% from a year ago, signaling continued growth in home building in 2013. Based on population growth and "scrappage," housing starts will eventually rise to about 1.5 million units per year (probably by 2015), which means the recovery in home building still has much further to go. In other recent housing news, the NAHB index, which measures confidence among home builders, slipped to 46 in February from 47 in January. The decline was due to less foot traffic among prospective homebuyers. Don't get worked up about this dip, which follows nine consecutive increases. The bottom line is that housing – construction, prices, and sales – is well into recovery and will continue along this path for the next few years. That path will not be perfectly straight, there will be zigs and zags along the way. Just don't let those temporary deviations distract from the trend.
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