Implications: Despite unusually severe winter weather throughout much of the country, housing starts surged in January, easily beating consensus expectations and reaching the highest level in four months. However, all of the increase was due to a 77.7% spike in multi-family units, which are extremely volatile from month to month. Look for multi-family starts to drop next month, closer to the recent trend. That said, the general trend in multi-family units should continue to go higher given the movement away from owner-occupancy and toward rental occupancy. The rental vacancy rate dropped to 9.4% in late 2010, the lowest level since 2003. Meanwhile, as multi-family starts were surging, single-family starts fell 1% in January, with declines in the South and Northeast offsetting gains in the Midwest and West. The total number of homes under construction was unchanged in January and the number of home completions fell. This is part of the necessary process of clearing out the excess inventory of homes. As housing inventories are cleared out, home construction will pick up to meet demand. We expect overall housing starts to gradually trend higher in 2011.
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Posted on Wednesday, February 16, 2011 @ 9:43 AM
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