Housing starts increased 18.6 percent month-over-month in January according to the latest data on new residential construction announced by the Census Bureau and the U.S. Department of Housing and Urban Development on Thursday.
The data, which was delayed due to the government shutdown in January indicated that housing starts rose to 1.23 million in January compared to 1.03 million in December 2018. Building permits also rose 1.4 percent month-over-month to 1.34 million compared with December 2018's 1.32 million. However, both these housing indicators were below their January 2018 levels.
Housing completions, though, saw an uptick on an annual as well as month-over-month basis rising to 1.24 million in January—an increase of 27.6 percent over December 2018's 975,000 and 2.1 percent above January 2018's 1.21 million.
The rising housing starts indicate increasing builder confidence according to experts. “In January, the 18.6 percent monthly increase in housing starts reflects rising consumer sentiment and builder confidence. Despite the headwinds, home builders are pushing through new construction projects,” said Mark Fleming, Chief Economist, First American.
According to Danielle Hale, Chief Economist, realtor.com, "A spike in mortgage rates in November undermined buyer purchasing power and caused a dip in builder confidence and weaker construction at the end of 2018. Since then, however, lower mortgage rates have contributed to improving builder confidence and higher pending home sales that could help drive further building production."
Additionally, Fleming said that the annual increase in completions also signaled immediate relief from "the housing shortage and sends an optimistic message about the housing market."
Single-family starts were a strong note in the report, increasing 25.1 percent in January and registering 4.5 percent higher than one year ago.
Fleming said that January's year over year growth in completions would help bridge the gap between housing supply and demand. "We estimate that over one million new households were created in 2018, adding to the demand for housing. Yet, according to January 2019 year-over-year data, only 862,000 new housing units were completed–the net number of units completed when accounting for single-family dwellings, apartments, manufactured homes and obsolescence," he said. "This leaves a shortage of over 680,000 housing units today. January’s year-over-year growth in completions will help bridge this gap between supply and demand."