Housing starts (construction on new homes) fell 3.6% in January across America, according to the U.S. Census Bureau and U.S. Department of Housing and Urban Development.
This sounds scary, but is barely a blip after skyrocketing at the end of 2019, when housing starts hit a 13-year high.
Also hitting a 13-year high (read: pre-housing crash levels) is applications for building permits, up 9.2% in January, a promising sign for future growth.
National Association of Realtors (NAR) Chief Economist, Dr. Lawrence Yun said, “this housing data is quite jumpy,” but assures people that the 3.6% dip in housing starts is “nothing to be concerned about,” as housing starts are “on an upward path,” continuing to trend positively overall.
Dr. Yun has long pointed to home builders as the secret ingredient for a healthier housing market, as it positively impacts restrictive inventory levels, and allows in otherwise pushed out buyers, particularly first timers.
“More construction will mean more housing inventory for consumers in the later months of this year,” he notes, adding that spring could still be tough for buyers with perpetually tight inventory levels, but “as trade-up buyers move into these new completed homes in the near future, their existing homes will be released onto the market.
Joel Kan, AVP of Economic and Industry Forecasting at the Mortgage Bankers Association (MBA) calls today’s data “another step in the right direction,” noting that despite the December surge followed by the January retraction, “the current pace is still over 1.5 million units – remaining close to the highest levels since 2006.”
Kan points out that while single-family starts are down, they’ve exceeded an annual pace of 1M+ units for a second consecutive month, the first time since 2007. Further, he points out that multifamily just had their strongest month of production in 34 years.
“The success of the spring buying season greatly depends on how much new and existing inventory is on the market,” said Kan.
It could still be a tight market in coming months, but today’s data offers hope for a less “jumpy” market.