Housing Starts Down & Permits Up

The department of Housing and Urban Development (HUD) and the U.S. Census Bureau recently released data that shows housing starts declined nationally in January while permits for new home construction increased.

According to the data, housing starts declined 8.5 percent from the previous month to a seasonally adjusted annual rate of 890,000 units.  The decline was accredited entirely to a double-digit dip on the “typically volatile” multifamily side of the industry.

The above assessment is borne out by the fact that single-family housing starts went up slightly in January, increasing by a very slight 0.8 percent to a seasonally adjusted annual rate of 613,000 units.  The numbers were essentially unchanged from the previous month.  Data shows this was the strongest pace of single-family housing production since July 2008.

As noted the overall decline in housing starts was due to multifamily housing, which can often see significant month-to-month volatility, and had a substantial decline of 24.1 percent to 277,000 units.

In January, and on a regional basis, combined single and multifamily housing production rose 4.1 percent in the South and 16.7 percent in the West, but fell 35.3 percent in the Northeast and 50 percent in the Midwest.  The regional decline in starts for the Northeast and Midwest in January was heavily due to seasonal issues.

In regards to permits for new home construction, HUD and Census Bureau data reveals that the issuance of new permits rose 1.8 percent to 925,000 units in January; this was the highest pace since mid-2008.

Permits for new home construction is a “leading” economic indicator in that it shows planned future building activity.  These permits rose 1.9 percent for single-family homes to a seasonally adjusted annual pace of 584,000 units.  They also rose 1.5 percent on the multifamily side to a 341,000-unit pace in January. Both figures were the strongest permit numbers seen since mid-2008.

The issuance of permits rose in three out of four regions in January.  The Northeast saw a 10.1 percent gain, with a 1.4 percent increase in the Midwest, while the South had a 1.1 percent gain. The West was the only region with no gain, yet with only a slight 0.5 percent decline.