| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| Starts - Annual Rate | 1.365M | 1.309M to 1.391M | 1.309M | 1.382M | 1.371M |
| Permits - Annual Rate | 1.350M | 1.320M to 1.375M | 1.339M | 1.330M | 1.337M |
Highlights
Starts of new homes are down 4.5 percent to 1.309 million units at an annual rate in January after a downward revision to 1.371 million units in December. Starts are 21.4 percent below the 1.666 million units in January 2022. The January level is below the consensus of 1.365 million units in an Econoday survey and matches the low end of the survey range. Total starts are now down for the fifth month in a row.
Single-family unit starts are down 4.3 percent to 841,000 in January from December and off 27.3 percent year-over-year. Starts of multi-unit homes are down 4.9 percent to 468,000 units in January after a revised 492,000 in December. Multi-unit home construction had held up better during the recent rise in mortgage rates. However, it appears that demand for multi-unit properties has been exhausted, and/or perhaps new projects have yet to break ground.
The number of building permits issued is essentially unchanged in January at 1.339 million units, up a scant 0.1 percent after a small upward revision to 1.337 million units in December. Permitting of new construction has been fairly stable in the last three months and suggests that the decline in new home building may have bottomed for now.
Permits issued for single-family homes are down 1.8 percent to 718,000 units in January after 731,000 in December and have now declined for 8 straight months. Permits issued for multi-unit homes are up 2.5 percent in January to 621,000 after 606,000 in December. The pace is down 3.6 percent from 644,000 in January 2022.
What strength there is in the residential building sector is in multi-unit construction which offers more affordable prices and is often the choice of renters entering homeownership. Rising rents will be an incentive to buy a home for those who can qualify for a mortgage.
Single-family unit starts are down 4.3 percent to 841,000 in January from December and off 27.3 percent year-over-year. Starts of multi-unit homes are down 4.9 percent to 468,000 units in January after a revised 492,000 in December. Multi-unit home construction had held up better during the recent rise in mortgage rates. However, it appears that demand for multi-unit properties has been exhausted, and/or perhaps new projects have yet to break ground.
The number of building permits issued is essentially unchanged in January at 1.339 million units, up a scant 0.1 percent after a small upward revision to 1.337 million units in December. Permitting of new construction has been fairly stable in the last three months and suggests that the decline in new home building may have bottomed for now.
Permits issued for single-family homes are down 1.8 percent to 718,000 units in January after 731,000 in December and have now declined for 8 straight months. Permits issued for multi-unit homes are up 2.5 percent in January to 621,000 after 606,000 in December. The pace is down 3.6 percent from 644,000 in January 2022.
What strength there is in the residential building sector is in multi-unit construction which offers more affordable prices and is often the choice of renters entering homeownership. Rising rents will be an incentive to buy a home for those who can qualify for a mortgage.
Market Consensus Before Announcement
January's annualized rates are expected at 1.365 million for starts and 1.350 for permits which would compare with 1.382 and 1.330 million in December. Starts and permits have been in steady decline.
Definition
Housing starts measure the initial construction of single-family and multi-family units on a monthly basis. Data on permits provide indications of future construction. A housing start is registered at the start of construction of a new building intended primarily as a residential building. The start of construction is defined as the beginning of excavation of the foundation for the building.
Description
Two words: Ripple Effect. This narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. By tracking economic data such as housing starts, investors can gain specific investment ideas as well as broad guidance for managing a portfolio.
Home builders usually don't start a house unless they are fairly confident it will sell upon or before its completion. Changes in the rate of housing starts tell us a lot about demand for homes and the outlook for the construction industry. Furthermore, each time a new home is started, construction employment rises, and income will be pumped back into the economy. Once the home is sold, it generates revenues for the home builder and a myriad of consumption opportunities for the buyer. Refrigerators, washers and dryers, furniture, and landscaping are just a few things new home buyers might spend money on, so the economic"ripple effect" can be substantial especially when you think of it in terms of more than a hundred thousand new households around the country doing this every month.
Since the economic backdrop is the most pervasive influence on financial markets, housing starts have a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the housing starts data carry valuable clues for the stocks of home builders, mortgage lenders, and home furnishings companies. Commodity prices such as lumber are also very sensitive to housing industry trends.
Importance
The housing starts report is the most closely followed report on the housing sector. Housing starts reflect the commitment of builders to new construction activity. Purchases of household furnishings and appliances quickly follow.
Interpretation
The bond market will rally when housing starts decrease, but bond prices will fall when housing starts post healthy gains. A strong housing market is bullish for the stock market because the ripple effect of housing to consumer durable purchases spurs corporate profits. In turn, low interest rates encourage housing construction.
The level as well as changes in housing starts reveals residential construction trends. Housing starts are subject to substantial monthly volatility, especially during winter months. It takes several months to establish a trend. Thus, it is useful to look at a 5-month moving average (centered) of housing starts.
It is useful to examine the trends in construction activity for single homes and multi-family units separately because they can deviate significantly. Single-family home-building is larger and less volatile than multi-family construction. It is more sensitive to interest rate changes and less speculative in nature. The construction of multi-family units can be substantially influenced by changes in the tax code and speculative real estate investors.
Housing construction varies by region as well. The regions of the United States do not all follow exactly the same economic patterns because industry concentration varies in the four major regions of the country. The regional dispersion can mask underlying trends. The total level of housing construction as well as the regional distribution of housing construction is important.
Housing permits are released together with housing starts every month and are considered a leading indicator of starts. In reality, housing permits and starts typically move in tandem each month. However, there are some exceptions. For instance, if permits are issued late in the month, and weather does not permit immediate excavation, then permits might lead starts. For the most part, though, permits are not a good predictor of future housing starts. Incidentally, housing permits (but not starts) are one of the ten components of the index of leading indicators compiled by The Conference Board.
Home builders usually don't start a house unless they are fairly confident it will sell upon or before its completion. Changes in the rate of housing starts tell us a lot about demand for homes and the outlook for the construction industry. Furthermore, each time a new home is started, construction employment rises, and income will be pumped back into the economy. Once the home is sold, it generates revenues for the home builder and a myriad of consumption opportunities for the buyer. Refrigerators, washers and dryers, furniture, and landscaping are just a few things new home buyers might spend money on, so the economic"ripple effect" can be substantial especially when you think of it in terms of more than a hundred thousand new households around the country doing this every month.
Since the economic backdrop is the most pervasive influence on financial markets, housing starts have a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the housing starts data carry valuable clues for the stocks of home builders, mortgage lenders, and home furnishings companies. Commodity prices such as lumber are also very sensitive to housing industry trends.
Importance
The housing starts report is the most closely followed report on the housing sector. Housing starts reflect the commitment of builders to new construction activity. Purchases of household furnishings and appliances quickly follow.
Interpretation
The bond market will rally when housing starts decrease, but bond prices will fall when housing starts post healthy gains. A strong housing market is bullish for the stock market because the ripple effect of housing to consumer durable purchases spurs corporate profits. In turn, low interest rates encourage housing construction.
The level as well as changes in housing starts reveals residential construction trends. Housing starts are subject to substantial monthly volatility, especially during winter months. It takes several months to establish a trend. Thus, it is useful to look at a 5-month moving average (centered) of housing starts.
It is useful to examine the trends in construction activity for single homes and multi-family units separately because they can deviate significantly. Single-family home-building is larger and less volatile than multi-family construction. It is more sensitive to interest rate changes and less speculative in nature. The construction of multi-family units can be substantially influenced by changes in the tax code and speculative real estate investors.
Housing construction varies by region as well. The regions of the United States do not all follow exactly the same economic patterns because industry concentration varies in the four major regions of the country. The regional dispersion can mask underlying trends. The total level of housing construction as well as the regional distribution of housing construction is important.
Housing permits are released together with housing starts every month and are considered a leading indicator of starts. In reality, housing permits and starts typically move in tandem each month. However, there are some exceptions. For instance, if permits are issued late in the month, and weather does not permit immediate excavation, then permits might lead starts. For the most part, though, permits are not a good predictor of future housing starts. Incidentally, housing permits (but not starts) are one of the ten components of the index of leading indicators compiled by The Conference Board.
