The U.S. Census Bureau and the Department of Housing and Urban Development said Wednesday that housing starts slumped by 8.5 percent in January, following a 15.7 percent expansion in December. Although a slower start than expected, the seasonally adjusted 890,000 annual pace reported for last month is still the third highest in five years.
The January rate was down from the boom in December, which was upwardly revised to an annual rate at 973,000, the highest total since June 2008. In January 2012, housing starts were at a 720,000 annual rate, 23.6 percent lower than the current year’s month.
The decrease in January was entirely due to a sharp drop in the volatile multi-family unit (i.e. apartments) category, which declined in starts by 24.1 percent for the month. Commencement of building on single-family units, which comprise about two-thirds of all housing starts, increased by 0.8 percent to their highest level since July 2008.
Judging by freshly-issued permits, breaking ground for new homes may accelerate in coming months. The number of new permits rose by 1.8 percent to an annual rate of 925,000 from 909,000 in December, representing the highest level in 52 months. The 925,000 clip is 35 percent higher than the level from January 2012.
Housing starts slowed in the Northeast (from 116,000 in December to 75,000 in January) and the Midwest (from 190,000 in December to 95,000 in January), but increased in the South (from 464,000 in December to 483,000 in January) and in the West (from 203,000 in December to 237,000 in January).
Housing starts are notoriously volatile and often subject to large revisions.
On Tuesday, the National Association of Home Builders said its Housing Market Index dipped to 46 in February from a 47 reading in January. Economists were expecting a rise to 48 for the month as a strengthening signal that respondents were viewing the general economy and housing markets as improving. Readings above 50 for the NMI indicates more respondents than not view current conditions as “good.”
The NAHB continues to site stringent lending practices by banks and shriveling inventory as factors in less-than-optimistic viewpoints, although the index has risen dramatically over the past eight months.
In more things housing, economists will be watching for existing home sales statistics from January at 10 AM ET Thursday.