May 27, 2018

Builders Start 2016 on a Cautious Note

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Builders Start 2016 on a Cautious Note

Homebuilding got off to a sluggish start in the new year. Housing starts fell 3.8 percent in January month-over-month, reaching a seasonally adjusted annual rate of 1.099 million, according to data released Wednesday from the Commerce Department. Housing permits – a gauge of future construction – were also down slightly at 0.2 percent.

Read more: This Has Homebuilders the Most Worried

The report is in line with what the National Association of Home Builders says it is hearing from builders. They’re still “being cautious as they face some market uncertainties and supply side constraints,” says NAHB Chairman Ed Brady. A report out earlier this week from NAHB showed builders were increasingly concerned about the high cost and lack of availability of lots and labor.

Some analysts blamed the decline in homebuilding in January mostly on the weather and called it a temporary setback.

“Despite the modest dip in starts this month, we expect to see ongoing, gradual growth in housing production in 2016,” says NAHB Chief Economist David Crowe. “An improving economy, solid job creation and pent-up demand for housing should keep the market moving forward.”

In January, both single- and multifamily production slowed. Single-family housing starts dropped 3.9 percent to a seasonally adjusted annual rate of 731,000 units while multifamily starts dropped 3.7 percent to 380,000 units.

All four regions of the U.S. saw declines in January. Housing starts dropped the most in the Midwest, falling 12.8 percent month-over-month, followed by losses of 3.7 percent in the Northeast, 2.9 percent in the South, and 0.4 percent in the West.

Source: National Association of Home Builders and “U.S. Housing Starts, Building Permits Fall in January,” Reuters (Feb. 17, 2016)