January Housing Starts: Wounds Continue to Heal

• January housing starts climbed 18.6 percent from December and fell 7.8 percent from a year ago, to 1.23 million units (SAAR) according to the Census Bureau. December starts were revised downward by almost 300,000 units, indicating even worse conditions than initially reported.
• Single-family starts rose 25.1 percent from December and 4.5 percent from a year ago; multifamily starts were up 4 percent month-over-month and down 33.6 percent year-over-year.
• Housing permits were up 1.4 percent from December but down 1.5 percent from January 2018.
• National housing completions rose 27.6 percent from revised December numbers and 2.1 percent from a year earlier.

It didn't take long for the wounds left by December's starts and permits data to heal. The previous month's disappointing release – announced just ten days ago – showed single family starts sink to their lowest level in over two years. We’re still seeing some year-over-year declines, but it takes some time for builders to adjust to different market conditions, and it’s likely real progress won’t be seen in the data for a few months’ yet, once the headwinds from late 2018 are fully in the rear view. But today's figures were a marked improvement and a signal that builders are finally in the position to take advantage of more forgiving market conditions created by easing headwinds such as retreating mortgage rates, the stock market's recovery and a less ambitious interest rate outlook. What's more, January new home sales ticked up, albeit to still historically low levels, allowing builders to offload inventory that had been piling up for much of the last year. It was a difficult end to 2018, but builders appear primed for better days ahead.

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