The Commerce Department reported(.pdf) that new home construction continues to track higher, but that housing starts fell sharply from a five-year high the month prior, down from an upwardly revised annual rate of 973,000 units in December to 890,000 in January. Permits for new construction, a key leading indicator for the home building industry, rose to a four-and-a-half year high, up from a rate of 909,000 to 925,000.
While this is a difficult time of the year to make sense of housing data since winter activity is only a fraction of summer activity and seasonal adjustments have a big impact on the final results, it’s worth noting that, even after the decline, January housing starts were the second highest since the recovery began.
From year ago levels, housing starts are up 23.6 percent and permit issuance is 35.2 percent higher. As shown above, home building bottomed back in 2011 at historic lows – far below the 1991 lows and even worse in population adjusted terms – however, the industry has rebounded steadily ever since.
Last month, housing starts for multi-family units – the main driver for the multi-year rebound - fell 24.1 percent while single-family housing starts rose 0.8 percent to their highest level since 2008.
With housing inventory remaining low and since current levels of home building are still down more than one-third from the pre-housing bubble norm, residential construction will likely continue to rise, contributing to U.S. economic growth again this year as it did last year for the first time since 2005.
Source: Iacono Research
