New-Home Market Hits Temporary Blip
Builders started construction on fewer homes in January, but the slowdown may be temporary. A gauge for future construction reached its quickest pace in four years.
Housing permits—which show future construction—rose to their quickest pace since mid-2008, up to 1.8 percent in January.
However, housing starts in January slipped 8.5 percent, attributed largely to a double-digit fall in multifamily construction, according to data released by HUD and the U.S. Census Bureau on Wednesday.
“Steady demand for new homes is prompting builders to put more construction crews back to work in order to replenish thin supplies of completed product,” says Rick Judson, chairman of the National Association of Home Builders. “We expect this progress to continue through the spring buying season and beyond, with credit availability and poor appraisals being the primary limiting factors.”
Following a substantial gain in the multifamily housing sector in December, construction on multifamily housing fell 24.1 percent in January, reflecting an adjustment from that “unsustainable gain,” says NAHB Chief Economist David Crowe.
Meanwhile, single-family housing starts ticked up slightly by 0.8 percent in January—reaching 613,000 units, the strongest pace since July 2008.
Still, the pace of construction remains less than half of what most economists consider healthy for the sector.
Regionally, housing starts—for both single-family and multi-family housing—gained the most in the West, increasing 16.7 percent in January. The South saw gains of 4.1 percent. However, in colder regions like the Midwest, housing starts fell 50 percent, and by 35.3 percent in the Northeast.