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U.S. January housing starts up 0.8% to 1.012 million unit annual rate Thomson FinancialFebruary 20, 2008 WASHINGTON, February 20, 2008 (Thomson Financial) - U.S. housing starts rebounded modestly in January, as predicted, but the increase was primarily in the volatile multi-family category and starts of single-family houses continued to decline in most of the country. The Commerce Department said total January starts rose 0.8% to a 1.012 million unit annual rate, up from the slightly lower revised December number of 1.004 million units. Economists were expecting a mild rebound to a 1.010-million-unit rate after a combined November-December plunge of more than 20%. 'January's increase in starts was the first in four months, but it was too small to raise excitement,' said Thomson IFR Markets economist Jeoff Hall. Building permits in January fell 3.0% to 1.048 million units, close to the the expected 1.040 million rate. New construction of single family homes fell 5.2% to a 743,000 unit annual rate, while multi-family construction rose 17.6% to 247,000 units started. By region, the Northeast had the biggest increase, 18.9% and also had an exception to the fall in single-family decline with a 43.8% rise. Severe weather had hampered starts in December. The Midwest had a 12% rise in starts overall with flat single-family construction. The South had a 2.9% drop with single-family homes dropping 9.8%. And in the West, the total fell 6.2% with the worst performance for single family homes, down 20.3%. Year-over-year, housing starts plunged 27.9% from January of 2007 and single-family starts fell 33.8% in the same period. 'The January level for housing starts is down an annualized 40.4% versus the fourth quarter average. This result indicates that residential investment will be a significant drag on 1Q real GDP growth,' according to Gary Bigg at Bank of America Securities. Builders have been aggressively cutting both prices and starts of new homes but tighter mortgage lending has been working against them. 'We're not even taking in 50-60% of the people who inquire,' said Bob Moulton, president of the Americana Mortgage Group. Even as the Fed has been cutting its target Fed funds rate, the rate on an average 30-year fixed rate loan has gone up three quarters of a percentage point, so Munson says 'I think the worst is yet to come.' For the calendar year 2007, U.S. housing starts were off 24.7 pct from 2006. Some economists have been saying total housing starts need to fall well below a million units per year before the industry turns up again. 'The magnitude of the housing bubble was unprecedented, and the corrective process promises to be a long and painful one,' said MFR economist Joshua Shapiro.
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