Housing Starts Up, Permits Down, Mixed Economic Signals Continue

Construction starting back up?

The U.S. Commerce Department today reports that housing starts rose 2.8% in January to an annual rate of 591,000 yet permits for new building projects fell 4.9% after an uptick in December. So, homes broke ground, but is the forecasters’ celebratory dance premature, given that permits aren’t rising along with starts?

“Despite the mixed performance at the start of the year, the outlook for growth in housing activity remains positive,” Commerce Under Secretary Rebecca Blank said. “Americans continue to recognize that this is a good time to buy a home. Mortgage rates are low and the Administration’s decision to extend the tax credit through April provides attractive opportunities for buyers in the coming months.”

Yes, mortgage rates are low, but so is demand for loans. Builder sentiment dropped last month despite the starts and just last month, the NAHB said that “the current financial situation has led to sharply decreased construction of communities that serve the market. Without a chance in the availability of capital for development and construction, there could well be a shortage of such housing when it is most needed.”