Starts Tumbled In January As Tariff Worries, Rates Put Pressure On Builders

New construction indicators floundered in January as tariff anxiety and unsold inventory put homebuilders on edge.

Overall starts slipped 9.8% last month to a seasonally adjusted annual rate of 1.37 million, according to new data from the U.S. Census Bureau. They declined 0.7% from January 2024.

Economists surveyed by Bloomberg had expected an annualized 1.39 million pace.

Single-family starts in particular fell 8.4% to an annualized rate of 993,000, their first dip since October 2024.

Permits, an indicator of future construction, fared slightly better, increasing by 0.1% to a rate of 1.48 million.

Homebuilder confidence took a hit as the reality of President Donald Trump’s tariff war set in. New construction relies on imported goods like lumber.

“While builders hold out hope for pro-development policies, particularly for regulatory reform, policy uncertainty and cost factors created a reset for 2025 expectations,” Carl Harris, chairman of the National Association of Home Builders, said.

At the same time, stagnating interest rates are causing inventory to pile up in many markets, a headache for home sellers and builders alike.

There was a 3.7-month for-sale supply on the market in January, the most in six years and historically enough to indicate a buyer’s market. But home shoppers still don’t feel like they have the upper hand.

“Many buyers don’t feel like they are in a buyer’s market, with home prices at near-record highs and mortgage rates elevated. But we are more than halfway through the decade and this is the first time we can say that buyers have as much, if not more, power than sellers,” Redfin Economics Research Lead Chen Zhao commented.