Housing construction slid again in January but building permits rose slightly.
Residential starts fell 4.5% from December to an annualized rate of 1.309 million, down 21.4% from the same time last year, according to data from the U.S. Census Bureau. This is below estimates from economists surveyed by Bloomberg, who expected a pace of 1.36 million.
It is the fifth consecutive decline and the longest streak since 2009.
Permits for new homes ticked up by 0.1% to a rate of 1.34 million, though single-family permits were down 1.8% from December. Permits offer an indication of how many homes will be built in the coming months.
Builders are cautiously optimistic about the future.
The National Association of Homebuilders Builder Confidence Index recently posted its highest reading since September 2022.
“With the largest monthly increase for builder sentiment since June 2013, excluding the period immediately after the onset of the pandemic, the HMI indicates that incremental gains for housing affordability have the ability to price-in buyers to the market,” said NAHB Chairman Alicia Huey.
“The nation continues to face a sizeable housing shortage that can only be closed by building more affordable, attainable housing. However, the two monthly gains for the HMI at the start of 2023 match the cautious optimism noted by the large number of builders at the recent International Builders’ Show in Las Vegas, who reported a better start to the year than expected last fall.”
Homebuyer demand has increased despite higher mortgage rates.
Pending home sales are still falling but at a much smaller rate than last year’s lows.
Dr. Lisa Sturtevant, chief economist at Bright MLS, noted that both buyers and sellers are adjusting to the “new normal” of 6% rates and making their way back into the market.
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