January saw total housing starts fall by 3.6%, but economists were more focused on home building permits, which are a gauge of future house building. And what they saw left them upbeat about what could be coming, as housing permits rose to their highest level since March 2007.
Even so, the dip in housing starts to a seasonally adjusted annual rate of 1.57 million units was not good news for the short-term situation.
However, the decline in housing starts last month is “nothing to be concerned about”, insisted National Association of Realtors’ chief economist Lawrence Yun.
“The housing data is quite jumpy. What is important is the trend line, which is clearly on an upward path,” he said. “Higher housing permit issuances are also a positive indicator for even greater production in the months ahead.”
Housing markets across the country have been facing ongoing inventory challenges, which some economists predict will only worsen in the months ahead. They have long been calling on builders to ramp up new-home construction to meet demand.
“More construction will mean more housing inventory for consumers in the later months of the year,” Yun said. “Spring months could still be quite tough for buyers, since it takes time to convert housing starts into actual housing completions. As trade-up buyers move into these new completed homes in the near future, their existing homes will be released onto the market.”
Housing permits—including both single-family and multifamily—rose 9.2% in January to an annualized pace of 1.55 million units. Broken out, single-family permits rose 6.4% to a 987,000 rate, while multifamily permits increased 14.6% to a 564,000 pace.
Regionally, housing permits posted the largest increase in the Northeast, surging 34.6% in January month-over-month. The other regions of the U.S. also posted increases, including an 8.2% uptick in the Midwest; 8% higher in the South; and 3.1% higher in the West.