Home construction lost ground in January, collapsing to the slowest pace in five months.
Residential home construction fell to a 1.33 million annual pace, down from a revised 1.56 million in December, according to data from the U.S. Census Bureau. This is the biggest drop since April 2020, and a far cry from Wall Street expectations of 1.45 million.
Single-family starts fared poorly, down by a 4.7% adjusted annual rate of 1.004 million units last month. But the driving factor was multifamily, which shrank by 35.6%, wiping out gains the month prior.
On the bright side, permits once again rose, besting last month’s 5-month high. Permits offer an indication of future construction.
Analysts partly attribute the inconsistency to severe winter weather conditions, which forced homebuilders to delay work despite acquiring permits in December.
But NAR Chief Economist Lawrence Yun noted that other factors influenced January’s data.
“More snow than usual fell across parts of the country, but the seasonally adjusted data implies a continuing housing shortage ahead. Multifamily construction fell 37% from a year ago and has been one of the lowest monthly activities over the past decade,” he wrote.
“Rising apartment vacancy is not due to fewer renters but rather due to the oversupply of construction in the past three years. Developers are, therefore, pulling back, at least temporarily.”
The number of units currently under construction is near its highest level since 1973, according to the National Association of Home Builders.
While multifamily is expected to pivot from that high, NAHB predicts that single-family construction will post gains.
“We are forecasting single-family starts to post a modest gain in 2024 as mortgage rates moderate on expected interest rate cuts by the Federal Reserve later this year,” NAHB Chief Economist Robert Dietz said.
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