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Housing Starts Dip, as Industry Optimism Prevails

Phil Hall
Feb 19, 2020
Photo credit: Getty Images/Pict Rider

Single-family housing starts in January were at a rate of 1,010,000, according to new data from the U.S. Census Bureau and the U.S. Department of Housing & Urban Development. This is 5.9 percent below the revised December figure of 1,073,000. Privately-owned housing starts in January were at a seasonally-adjusted annual rate of 1,567,000, down by 3.6 percent below the revised December estimate of 1,626,000 but also 21.4 percent above the January 2019 rate of 1,291,000.
Single-family authorizations in January were at a rate of 987,000, which is 6.4 percent above the revised December figure of 928,000. Privately-owned housing units authorized by building permits in January were at a seasonally-adjusted annual rate of 1,551,000, up by 9.2 percent from the revised December rate of 1,420,000 and 17.9 percent higher than the January 2019 rate of 1,316,000.
Single-family housing completions in January were at a rate of 877,000, a 3.5 percent drop from the revised December rate of 909,000. Privately-owned housing completions in January were at a seasonally-adjusted annual rate of 1,280,000, down by 3.3 percent from the revised December estimate of 1,323,000 but also 1.5 percent above the January 2019 rate of 1,261,000.
Industry reaction to the latest data was a mix of caution and optimism.
“The housing market is still experiencing supply shortages in many areas, but January’s residential construction data show yet another step in the right direction,” said Joel Kan, associate vice president of economic and industry forecasting at the Mortgage Bankers Association (MBA). “Following a surge of activity in December, housing starts pulled back slightly in January, but the current pace is still over 1.5 million units–remaining close to the highest levels since 2006.”
Kan added that while single-family starts decreased last month, they nonetheless “exceeded an annual pace of one million units for the second month in a row, and the first time since 2007. Multifamily starts also continue to be robust, rising for the second straight month and seeing the strongest month of production since 1986. In a promising development for new housing supply levels, single-family permits increased for the third month and to the highest level since 2007.”
Lawrence Yun, chief economist at the National Association of Realtors (NAR), said: “The latest month’s decline in housing starts is nothing to be concerned about. This housing data is quite jumpy. What is important is the trend line, which is clearly on an upward path. Higher housing permit issuances are also a positive indicator for even greater production in the months ahead.”
Quicken Loans Executive Vice President of Capital Markets Bill Banfield said: “January’s decrease in single-family home construction came on the heels of a strong December that was helped by warmer weather. With two strong months, it is clear warmer weather has helped the housing market earn some extra credit points. This could help generate positive momentum heading into the spring homebuying season.”
Brent Nyitray, director of capital markets at Ark Mortgage in Spring Valley, N.Y., noted: “Housing may turn out to be the economic surprise of 2020, and if that is the case, GDP estimates are way too low.” Senior Economist George Ratiu noted the demographic factors impacting the latest data.
“A swell of 4.8 million Millennials moves into its 30s, placing a sizeable footprint on the housing landscape,” Ratiu said. “With growing families and shifting preferences, younger buyers are looking for new homes in a market parched for affordable options. Sunny, lower-cost markets in the South are beckoning with an attractive mix of economic growth, lifestyle amenities, and affordability. The southbound migration is gaining steam this winter, and not just for ‘snowbirds’ looking for respite from Arctic snows, but for buyers of all ages looking for a permanent home.”

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