Housing starts jumped by a whopping +18.6% to 1.23 units, according to the Departments of Commerce and Housing and Urban Development.
First American chief economist Mark Fleming told HousingWire, “Despite the (industry) headwinds, home builders are pushing through new construction projects. In January, this +18.6% monthly increase in housing starts reflects rising consumer sentiment and rising builder confidence.”
Single-family home production also took off by +25.1% compared with the previous month as well.
Some 926M single-family units represent that +25.1% increase. However, according to Fleming, “We estimate that over 1M new households were created in 2018, adding to housing demand. Yet, as of January 2019 year over year data, only 862,000 new housing units were completed. When accounting for single-family dwellings, apartments, manufactured homes and obsolescence…” there is a shortage of some 680,000 units.
Overall, housing permits increased +1.4% in January 2019 to a seasonally adjusted annual rate of 1.34M. Single-family authorizations declined -2.1%, 812,000 permits, in January 2019 compared with December 2018. Multi-family permits came in at an annualized rate of 482,000 in January 2019.
There were 1.24M housing completions in January 2019, an increase of +27.6% from December 2018.
Robert Frick, a corporate economist with the Navy Federal Credit Union, told HousingWire that the construction industry is beginning to respond positively to lower mortgage rates. “More units are the key to any housing recovery, so this report (from the Departments of Commerce and HUD) is another green shot towards possible better times for home buyers this year. We already have lowering mortgage rates and slowing home price appreciation, and now we’ll be getting more units on the market, which will further moderate prices and more importantly, give more Americans a better chance at homeownership.”
A few cautionary hold-your-horses, however. New home sales were down nearly -7% in January on a month/month basis and -4% compared with January 2018, according to the US Census Bureau. Home prices for new homes in January were down -3.8%.
The supply of newly built homes rose to a 3-month high in January plus, according to CNBN, analysts report a growing number of spec homes or homes being built without buyers.
These weaker sales and increasing supplies translate into builders having to sit on more unsold homes while having to pay both taxes and maintenance on them. So despite sales being at the highest levels since June 2018, both sales and construction are below historic norms.
One last cautionary tidbit, builders are reporting that buyer traffic going through model homes is sparse.