Housing starts jumped an impressive 14.6% in January to a seasonally adjusted annual rate of 596,000. But building permits, which provide a look at future activity, fell 10.4% to an annualized rate of 562,000.
About the only piece of good news in this report report was a surge of nearly 80% in multifamily starts, which does directly support GDP.
However, the jump in that very volatile sector masked what otherwise was a disappointing release. Single family starts, which is a much better indicator of what’s happening in residential construction, declined 1% to 413,000. And single family permits also slipped, suggesting the new year is off to an uncertain start.
Moreover, weakness in single family housing starts over the past couple of months is all the more disappointing following modest gains from depressed levels earlier last fall.
Nasty weather, which seemed to have no effect on the multifamily sector, could have kept some potential homebuyers away, delaying a few starts.
But it appears the pessimism among builders has been well-founded amid competition from late-model foreclosures, tight lending standards and general pessimism about the direction of housing prices.
In summary, we’re not at levels seen two years ago when single family homes hit bottom, but the growth that was tied to the government tax credits is now a distant memory, as builders grapple with poor fundamentals.
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