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January Housing Starts Plummet

Groundbreaking on new homes dropped sharply last month, dragging down a positive trend line set over the final quarter of 2013.

The Census and HUD announced jointly Wednesday that housing starts in January ran at a seasonally adjusted annual rate of 880,000, a 16 percent decline from December’s revised estimate of 1.05 million and a 2 percent drop from January 2013’s 898,000.

On the single-family side, starts were estimated at a rate of 573,000, a 15.9 percent month-over-month drop.

The drop in starts came during a month in which homebuilder confidence in the single-family market (as measured by the National Association of Home Builders) measured at an index value of 57, reflecting general optimism. That index declined to 46 in February, marking the first time in nine months in which more builders expressed a negative outlook over a positive one.

Though some analysts have expressed doubt regarding the extent to which last month’s icy storms may have waylaid construction, others still say it can’t be disregarded.

“While we don’t want to dismiss out of hand the downbeat message of these measures of residential construction activity, we think that they largely reflect a correction from the sharp gain in starts in November and the recent unseasonably severe weather,” said Paul Diggle, property economist at Capital Economics.

Supporting the ice theory is the fact that starts retreated most in the Midwest (down 67.7 percent month-over-month), which experienced some of January’s worst weather.

Meanwhile, issuance of housing permits was at a seasonally adjusted rate of 937,000, down 5.4 percent from 991,000 in December. Permit activity was healthy compared to the prior year, however, coming up 2.4 percent.

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