The Economy

U.S. Housing Starts Drop 3.8% in January

Economists say the fundamentals of the housing market remain strong and the January decline may only be a temporary setback.
Matthew HellerFebruary 17, 2016

U.S. housing starts fell unexpectedly to a three-month low in January but economists said the decline likely does not indicate any long-term weakness in the housing market.

Groundbreaking fell 3.8% to a seasonally adjusted annual pace of 1.099 million units, the lowest rate since October, the U.S. Commerce Department said on Wednesday. Economists polled by Reuters had forecast housing starts rising to a 1.17 million-unit pace last month.

The report followed a survey on Tuesday showing confidence among homebuilders fell in February amid concerns over “the high cost and lack of availability of lots and labor.”

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“Builders are reflecting consumers’ concerns about recent negative economic trends,” David Crowe, chief economist for the National Association of Home Builders, told Forbes. “However, the fundamentals are in place for continued growth of the housing market. Historically low mortgage rates, steady job gains, improved household formations and significant pent up demand all point to a gradual upward trend for housing in the year ahead.”

All regions of the U.S. suffered setbacks in January, with housing starts tumbling a steep 12.8% in the Midwest, 3.7% in the Northeast,  2.9% in the South, and 0.4% in the booming West. New applications for building permits, a bellwether for forthcoming construction, edged down 0.2% to 1.202 million, from a downwardly revised December rate of 1.204 million.

“Temperatures dropped in January and a major snowstorm hit the East Coast, slowing construction activity after a warmer-than-usual winter,” the Wall Street Journal noted.

Scott Clemons, chief investment strategist at the private financial services firm Brown Brothers Harriman, cautioned against reading too much into the January numbers.

“If you look at Januaries alone, the report today was the best January for housing starts since 2007,” he told Forbes. “What I think we’re seeing is a continued gradual recovery in housing. What the housing market lacks in vitality it makes up for in durability.”

“The key findings from today’s report is that month-to-month we’re seeing little change in new construction, but year-over-year there is solid growth,” said Jonathan Smoke, chief economist for