The numbers: New home construction in the United States fell 14.8% in January as homebuilders scaled back new projects.
The pace of construction slowed as builders scaled back their activity due to winter weather in the United States in January.
New construction projects fell to an annual pace of 1.33 million from 1.56 million in December, the government said Friday. This is the number of homes that would be built in an entire year if construction occurred every month at the same pace as in January.
New construction starts fell to the lowest level since August 2023.
January’s decline was the sharpest since April 2020, during the coronavirus pandemic, when departures fell nearly 27%. Excluding the pandemic-related decline, new construction has fallen by the most since 2015.
The figure was lower than expectations on Wall Street, where the expected rate was 1.45 million. The numbers are seasonally adjusted.
In January, single-family and multi-family construction decreased, the latter recording a drop of almost 36%.
But in a more recent survey of builders conducted in January, builders were optimistic about future new home sales and optimistic about demand, as they expect interest rates to fall the rest of the year.
Building permits, a sign of future construction, fell 1.5% to 1.47 million.
Key Details: Builders reduced construction of new single-family homes, which fell 4.7%, as did apartments, which fell 35.8%.
The only region where builders increased construction was the Northeast, where single-family home starts increased 26.7%. All other regions recorded a decline in January.
Permits for single-family homes increased 1.6% in January, while permits for apartments decreased 9%.
Switchboard: Housing starts are generally a volatile series, but the data indicates that builders slowed construction of new homes in January.
But most builders are optimistic about the future, as highlighted in a recent survey, and expect falling mortgage rates to spur home-buying demand.
Meanwhile, builders continue to benefit from the tailwinds of the persistent shortage of previously owned homes. While new homes historically accounted for only a tenth of overall sales, that share has jumped to 30%, the National Association of Home Builders told MarketWatch.
What are they saying? “New construction fell in January by the most since April 2020, led by a huge decline in multifamily construction. We suspect the multifamily sector will continue to be a drag on new development this year, given the huge number of multifamily units already under construction,” Thomas Ryan, a real estate economist at Capital Economics, wrote in a note.
“The sharp drop in starts may reflect bad weather in January,” Ali Jaffery of CIBC Economics wrote in a note. But as mortgage rates rise, “housing activity should remain weak until the Fed signals a clearer intention to ease policy,” he said.
Market reaction: US shares DJIA SPX rose early Friday and the yield on 10-year Treasury notes BX:TMUBMUSD10Y was above 4.3%.