Housing Start Moderates in January

The pace of home building in the U.S. moderated slightly in January, falling by 33,000 units to 1.24 million (annualized). But, this came on top of significant upward revisions in the prior two months. The monthly decline was related to the volatile multifamily segment, which saw construction pull back, while the pace of single-family construction improved. Building permits also rose by 57,000 to 1.28 million. The improvement was concentrated in the multifamily segment. The monthly decline in home building was concentrated in the West and Midwest while it improved in the South and Northeast.

Despite the slower pace of home building in January, upward revisions to the prior two months suggest that home building has been moving at a much faster pace than previously thought. Moreover, the healthy permitting activity across both the single and multifamily segments suggests continued progress in the pace of homebuilding in the coming months.

The recent rise in mortgage rates has likely fueled some uptick in sales activity but does pose some downside risk for homebuilding. Still, solid fundamentals, including continued employment, wage gains, and rising household wealth will help keep housing demand on a moderately positive course. Overall, residential investment should continue to provide a modest support to economic growth in 2017.