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First Cut: Starts of new homes outpace expectations as builders active in midwinter

Starts of new homes declined 3.6% in January to 1.567 million units (SAAR) form 1.626 million units in December. The decrease was far less than expected and left the level at the second highest since 1.649 million units in December 2006. Starts were up 21.4% compared to January 2019. Low mortgage interest rates continue to buoy sales of new homes and builders are starting new units at an exceptional pace. Last year the pace of starts was improving slightly after the near-term peak in mortgage rates in November 2018. At present, rates are within striking distance of those from just over three years earlier. With solid employment and rising incomes, homebuyers are exercising their demand for housing at a time when it is more affordable. Builders are responding as fast as they can. This may be borrowing some activity from the spring months.

Starts of single-family units were down 5.9% to 1.010 million units in January after 1.073 million in December, and were the second highest since 1.042 million units in July 2007. Multi-unit starts were up 0.7% to 557,000 after 553,000, and jumped 71.4% from January 2019.

Starts were uneven across regions. These were up 31.9% in the Northeast, possibly reflecting relatively mild weather that helped builders be more active at a time when they typically are forced to idle projects. Starts were up 1.2% in the West and down 5.4% in the South and 25.9% in the Midwest.

Permits-issued in January gained 9.2% to 1.551 million units (SAAR) after 1.420 million in December and were up 17.9% compared to 1.316 million in the same month last year. Permits for single-family homes was up 6.4% to 987,000 in January from 928,000 in December, and up 20.2% compared to a year ago. Multi-unit permits rose 14.6% to 564,000 after 492,000 in the prior month, and were 13.9% higher compared to 495,000 in January 2019.

Permits were up across regions in January. The Northeast was particularly strong at up 34.6%, followed by up 8.2% in the Midwest, up 8.0% in the South, and up 3.1% in the West.



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