U.S. Homebuilding Sees Biggest Drop Since Pandemic

February 13, 2024

U.S. homebuilding in 2024 got off to a shaky start in January, as winter storms stalled construction and resurgent mortgage rates complicated the housing market’s long-term outlook.

Housing starts, a measurement of new home construction, fell 14.8% in January from the month before, according to data from the U.S. Census Bureau. That is the largest monthly decline since April 2020, when the coronavirus pandemic brought the economy to a halt. 

Housing starts fell to a seasonally adjusted annual rate of 1.331 million last month, the lowest number since August and well below the 1.46 million that economists polled by Dow Jones had been expecting. 

To some degree, the slowdown was due to harsh winter storms throughout the nation delaying the start of construction. A statement from the chief economist at the National Association of Realtors (NAR) attributed “Housing starts collaps[ing] in January” to there being “more snow than usual [falling] across the country,” but warned that “the seasonally adjusted data implies a continuing housing shortage ahead.”

This pessimistic medium-term outlook is born out by building permits for new construction. From December to January, building permits fell 1.5% to a seasonally adjusted 1.47 million.

Complicating the outlook for the housing market is uncertainty around the Federal Reserve’s plans to cut interest rates. A strong of conflicting data has caused many to believe that the Fed will maintain higher rates for longer than the market presumes, which has pushed mortgage rates back up after they retreated in the latter part of last year. 

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