U.S. Housing Starts Pull Back Sharply Off Eleven-Month High In January

(RTTNews) - After reporting a substantial increase by new residential construction in the U.S. in the previous month, the Commerce Department released a report on Wednesday showing housing starts pulled back by more than expected in the month of January.

The Commerce Department said housing starts plunged by 9.8 percent to an annual rate of 1.366 million in January after soaring by 16.1 percent to an upwardly revised rate of 1.515 million in December.

Economists had expected housing starts to tumble by 6.6 percent to an annual rate of 1.400 million from the 1.499 million originally reported for the previous month.

The sharp pullback came a month after housing starts surged to their highest level since hitting an annual rate of 1.546 million in February 2024.

"The pace of home construction slowed in January as builders were held back by cold and snowy conditions in the South," said Nationwide Economist Daniel Vielhaber.

He added, "Additionally, there was likely an element of returning to a more natural pace of building in that region following December's rebound from Hurricanes Helene and Milton in the fall."

The steep drop by housing starts reflected notable decreases by both single-family and multi-family starts, which dove by 8.4 percent and 13.5 percent, respectively.

Meanwhile, the report said building permits inched up by 0.1 percent to an annual rate of 1.483 million in January after falling by 0.7 percent to a slightly downwardly revised rate of 1.482 million in December.

Building permits, an indicator of future housing demand, were expected to slump by 1.6 percent to an annual rate of 1.460 million from the 1.483 million originally reported for the previous month.

The unexpected uptick by building permits came as multi-family permits crept up by 0.2 percent, while single-family permits were unchanged.

A separate report released by the National Association of Home Builders on Tuesday showed homebuilder confidence in the U.S. has unexpectedly deteriorated in the month of February.

The report said the NAHB/Wells Fargo Housing Market Index slumped to 42 in February after inching up to 47 in January. Economists had expected the index to come in unchanged.