- Housing starts fell 9.8% in January to an annualized pace of 1.37M units, following a 16% surge in December, as builders pulled back amid rising costs and harsh winter weather.
- Single-family starts dropped 8.4% to 993K units, while multifamily starts fell 13.5% to 373K units, reflecting broader concerns about mortgage rates, tariffs, and elevated inventories.
- Builders are cautious, with companies like PulteGroup (PHM) adjusting prices to sell off spec homes and offering mortgage rate buydowns to attract buyers.
- Looking ahead, economists expect housing construction to remain subdued as mortgage rates hover near 7%, inventory rises, and tariffs on lumber and goods increase costs.
US housing starts fell 9.8% in January as builders scaled back new projects following a December surge, according to Bloomberg.
Specifically, rising mortgage rates, tariffs, and elevated home inventories are weighing down construction activity nationally.
Home Construction Cools
US housing starts slowed significantly in January, dropping 9.8% to an annualized pace of 1.37M units, according to the Census Bureau. This decline followed a 16% surge in December, which many economists attributed to seasonal adjustments.
Single-family starts fell 8.4% to 993K units, the first decline since October, as freezing temperatures hampered construction. Multifamily starts dropped even further, down 13.5% to 373K units, reflecting growing concerns about oversupply and high financing costs.
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Rising Construction Costs
Builders face multiple headwinds in 2024, including:
- Mortgage rates near 7%, pressuring affordability
- Median home prices up 30% since December 2019
- Proposed 25% duties on lumber from Canada and Mexico and an existing 10% tariff on goods from China
To attract buyers, builders like PulteGroup Inc. (PHM) are offering mortgage rate buydowns and adjusting prices on spec homes, which have reached their highest inventory levels since 2007.
Inventory Climbs
While building permits—a key indicator of future construction—edged higher in January, single-family permits were flat, signaling continued caution.
Home completions rose for the first time since August, adding to the elevated supply of new homes, which is now at its highest level since December 2007.
Region by Region
Housing starts declined across the South, Midwest, and Northeast, reflecting broad-based weakness. Meanwhile, the West was the only region to post more housing starts than in December, likely due to milder weather than in other parts of the country.
Looking Ahead
While housing starts may rebound in February as weather conditions improve, economists expect modest growth in 2024. Elevated mortgage rates, rising costs, and abundant inventory will likely keep builders cautious, even as they adjust pricing and incentives to maintain sales.
The National Association of Realtors will release existing home sales data on Friday, offering further insight into broader housing market conditions.
