Housing starts in January rose 9.7% from December to a seasonally adjusted annual rate of 1,326,000, 7.3% above the January 2017 rate of 1,236,000, the Census Bureau and Department of Housing and Urban Development reported Friday morning.
The gain, the largest since October 2016, was fueled by a surge in multifamily construction, at an annual rate of 449,000 units. Single-family housing starts in January were up 3.7% to a rate of 877,000.
Building permits in January were up 7.4% to a seasonally adjusted annual rate of 1,396,000, 7.4% above the January 2017 rate of 1,300,000. Single-family authorizations in January were at a rate of 866,000, 1.7% below the revised December figure of 881,000.
Housing completions in January were at a seasonally adjusted annual rate of 1,166,000, 1.9% below the revised December estimate of 1,188,000 but 7.7% above the January 2017 rate of 1,083,000. Single-family housing completions in January were at a rate of 850,000, 2.2% above the revised December rate of 832,000.
Lawrence Yun, chief economist at the National Association of Realtors, issued the following analysis:
“Terrific news on housing starts in January with a solid 10% gain. This rise in single-family housing construction will help tame home price growth, and the increase in multifamily units should continue to help slow rent growth. The large gain in housing starts in the West (10.7%) is especially welcomed, as that region has been facing acute housing shortages. Ultimately, there is still large room for improvement given the fact overall housing inventory is currently near historic lows."
He continued, "This boost in housing supply not only helps the economy, but may also help the Federal Reserve temper the pace of future short-term rate hikes. That’s because the slow upward creep in the broad consumer price inflation is principally being driven by rising housing costs. Simply put, more housing supply means a lower inflation rate, and potentially a slower pace of interest rate increases by the Fed.”
Mark Fleming, chief economist for First American Financial Corp., was similarly buoyed. "As we analyze today’s housing starts data, it’s important to also consider the impact of construction labor on the velocity of new home construction. The employment situation report, released earlier this month, reported an increase of 5,000 residential construction jobs between December 2017 and January 2018. The number of residential construction jobs is now 1.3 percent higher than a year ago. The growth in residential construction jobs supports further improvement in the pace of home building because building a home does not readily lend itself to outsourcing and automation."
Fleming continued, "Builders broke ground on more homes this month compared to last year. Housing completions, the number of net new homes added to the housing stock, also increased dramatically compared with a year ago. This signals some relief for the supply shortage. The rise in permits, the leading indicator of housing starts, in conjunction with the rise in construction employment this month, signals an upward trajectory for housing starts in 2018. Based on the data this month, construction employment has eased as a headwind to housing starts. Now that’s a great (housing) start to 2018!"
