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Housing Starts, Permits Fall in January

blueprintsBuilders began work on fewer homes last month than they did at the end of 2014, underscoring the stop-start pace of housing's recovery.

Homebuilders broke ground on new homes at a seasonally adjusted annual rate of 1.07 million in January, the Commerce Department said Wednesday. January's rate of new construction was 2.0 percent below December's revised estimate of 1.09 million units annually but 18.7 percent above the year-ago pace of 897,000 units.

January's drop came entirely in the market for single-family houses, with starts falling 6.7 percent month-on-month to an annual rate of 678,000. Multifamily starts, meanwhile, climbed 7.5 percent to an annualized 387,000.

For January, the National Association of Home Builders (NAHB) reported that its index of builder confidence slipped slightly to a reading of 57, keeping above the line separating a market largely viewed as good from one viewed as bad. That index fell again in February, dropping to 55, the group said Tuesday.

While February's decline in confidence was chalked up to adverse weather hindering near-term homebuyer activity, conditions were fairly mild in January, note economists Patrick Newport and Stephanie Karol at IHS Global Insight. In an analytical note, the pair observed that "January 2015 was the 24th warmest and the 18th driest January in the 121-year record."

Starts slipped in three of the country's four regions, retreating to an annual rate of 111,000 in the Northeast; 140,000 in the Midwest; and 286,000 in the West. Construction remained healthy in the South, coming in at an annualized rate of 528,000.

Permits for new construction projects also fell back for the month, sliding 0.7 percent to an adjusted annual rate of 1.05 million, the Commerce Department said. Single-family permits were at a rate of 654,000, down 3.1 percent from December's revised figure.

Despite starting the year on a sour note, new housing should see some improvement in the coming months as the economy continues to strengthen and policymakers take aim at boosting housing affordability, Newport and Karol say.

"On the demand side, new construction will get a boost from the improving employment picture, but also from policy changes at the FHA, which seeks to improve affordability by cutting its annual mortgage insurance premium," the pair wrote. "This will have a secondary effect on the new-home market: FHA-insured mortgagees will likely buy existing homes, freeing up the current owners of the existing homes to enter the market for new homes."

About Author: Tory Barringer

Tory Barringer began his journalism career in early 2011, working as a writer for the University of Texas at Arlington's student newspaper before joining the DS News team in 2012. In addition to contributing to DSNews.com, he is also the online editor for DS News' sister publication, MReport, which focuses on mortgage banking news.
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