Implications:  Despite the drop in housing starts in January, the home building recovery has not come to an end.  Yes, this was the lowest level in three months, and yes, housing starts fell by 3.8% in January to a 1.099 million annual rate. But, a bad winter storm in the Mid-Atlantic and Northeast that NOAA rated as the fourth-most impactful winter storm since 1950 probably played a role in that weakness. Even with the decline in January, housing starts still remain up 1.8% from a year ago. To help get rid of the monthly volatility we look at the 12-month moving average, which is the highest since 2008 and up 9% from a year ago. Meanwhile, although permits to build homes also slipped slightly in January, they remain up a strong 13.5% versus a year ago with single-family permits up a solid 9.6%.  We expect housing to continue to be a bright spot in 2016-17.  The total number of homes under construction (started but not yet finished) increased 0.2% in January and are up 17.3% versus a year ago.  Based on population growth and "scrappage," we expect overall housing starts to rise to about 1.5 million units per year by 2017, so a great deal of the recovery in home building is still ahead of us.   In other recent housing news from yesterday, the NAHB index, which measures confidence among home builders, declined to 58 from 61 in January.  Readings greater than 50 mean more respondents report good market conditions. One year ago, the overall index was at 55, and many said Fed tapering would drive it lower.  But housing continues to grind higher.  Even with higher short-term rates, expect the sector to keep adding to real GDP growth in 2016.

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