Total housing starts fell 3.6% in January, but that’s not what housing economists were focused on with the latest data release from the Commerce Department on Wednesday. Instead, it was the gauge on future home building—housing permits—that had them upbeat about what could be coming. Housing permits last month climbed to the highest level since March 2007.
Still, it wasn’t all great news to the industry: Housing starts dipped to a seasonally adjusted annual rate of 1.57 million units in January, the Commerce Department reported Wednesday.
But “the latest month’s decline in housing starts is nothing to be concerned about,” says Lawrence Yun, chief economist at the National Association of REALTORS®. “The housing data is quite jumpy. What is important is the trend line, which is clearly on an upward path. Higher housing permit issuances are also a positive indicator for even greater production in the months ahead.”
Housing markets across the country have been facing ongoing inventory challenges, which some economists predict will only worsen in the months ahead. They have long been calling on builders to ramp up new-home construction to meet demand.
“More construction will mean more housing inventory for consumers in the later months of the year,” Yun says. “Spring months could still be quite tough for buyers, since it takes time to convert housing starts into actual housing completions. As trade-up buyers move into these new completed homes in the near future, their existing homes will be released onto the market.”
Housing permits—including both single-family and multifamily—rose 9.2% in January to an annualized pace of 1.55 million units. Broken out, single-family permits rose 6.4% to a 987,000 rate, while multifamily permits increased 14.6% to a 564,000 pace.
Regionally, housing permits posted the largest increase in the Northeast, surging 34.6% in January month-over-month. The other regions of the U.S. also posted increases, including an 8.2% uptick in the Midwest; 8% higher in the South; and 3.1% higher in the West.