The numbers: Construction on new U.S. homes fell a seasonally adjusted 4.5% in January to 1.31 million, the Commerce Department said Thursday.
The drop in construction on homes follows the decline in December, when housing starts also fell by 3.4%
The drop was larger than what Wall Street expected. Economists polled by the Wall Street Journal expected housing starts to drop to a 1.35 million rate from December’s initial estimate of 1.38 million.
Construction is at the lowest level since June 2020, during the depths of the coronavirus pandemic.
The annual rate of total housing starts fell from 27.3% from the previous year.
In December, housing starts were revised to a drop of 3.4% of 1.37 million, as compared to a previous drop of 1.4%.
Building permits for new homes rose 0.1% to 1.34 million in January.
Economists had expected building permits to rise to a 1.35 million rate from December’s initial estimate of 1.34 million.
Key details: On an unadjusted basis, housing starts fell 1% in January.
The construction pace of single-family homes fell 4.3% in January and apartments fell 5.4%.
Permits for single-family homes fell 1.8% in January, while permits in buildings with at least five units rose by 0.5%.
Notably, permits for middle housing, or buildings with 2 to 4 housing units like townhomes, rose by 26.1%.
Regionally, construction of homes rose the most in the south and the west.
Single-family construction in the south led the jump with a 11.6% increase. The northeast and west regions reported a drop in single-family construction.
Big picture: The housing starts data likely reflects builders’ subdued sentiment from back in January, when they were only slowly becoming confident that buyers would return.
Builders have since become even more confident that sales of new homes will increase, and are signaling that they will ramp up production in the months ahead.
Market reaction: U.S. stocks
were set to open higher early Thursday. The yield on the 10-year Treasury note
rose above 3.83%.