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Housing Starts Dive in January, Permits Rise to 4 1/2-Year High

Housing starts plunged 8.5 percent in January--the steepest drop in two years--to a seasonally adjusted annual rate of 890,000, the ""Census Bureau and HUD"":http://www.census.gov/construction/nrc/pdf/newresconst_201301.pdf reported jointly Wednesday.


Applications for residential permits rose 1.8 percent to a rate of 925,000, the highest level since June 2008.

Economists had expected start activity to drop to 914,000 in January from the initial report for December of 954,000 starts. Permits, according to the consensus forecast, were expected to increase to 920,000 from the original report of 903,000 in December.

Data on both starts and permits for December were revised upward: Starts rose to 973,000, and permits rose to 909,000.

Rebuilding efforts in the wake of Superstorm Sandy contributed to the increase in total starts in the Northeast for December. Census/HUD reported the annual rate for starts (both single- and multi-family) was 116,000, up from 68,000 in November. Starts in the Northeast fell to 75,000 in January, about the norm for the region.

The decline in starts was led by a steep drop in multi-family activity, which fell 24.1 percent to 277,000--the steepest month-over-month decline since December 2011, when starts fell 28.6 percent in one month.

Builders completed 724,000 residential units in January, an increase of 6.0 percent (41,000) from December. Single-family homes accounted for most of the increase: 37,000, the largest monthly gain since last April.

As the ""Sandy effect"" wound down, builders also faced weather challenges in January. Those hurdles stretched into February, culminating in the storm dubbed ""Nemo"" that paralyzed the Northeast February 8-9. The storm will likely have an impact on the starts report for February.

Despite the drop in the headline numbers for starts, the report showed continuing, steady strength for single-family activity, which improved a scant 0.8 percent over [COLUMN_BREAK]

December. In the last 12 months, single-family starts averaged 542,000, up from 440,000 in the prior 12 months. Multi-family starts averaged 253,000 in the last 12 months, up from 178,000 in the prior 12 months. The trend data--a 42.1 percent increase for multi-family activity compared with a 23.2 percent increase for single-family starts-- suggest a fundamental housing shift, which could have a longer-term impact on the housing and related mortgage finance sectors.

The longer-term data for permits suggests the same shift. In the last 12 months, permit filings for multi-family units averaged 299,000, up almost 42 percent from 211,000 in the prior 12 months. Single-family permits averaged 522,000 in the last 12 months, an increase of 23 percent over the 423,000 average for the prior 12 months.

""Builder confidence in January"":https://themreport.com/articles/builder-confidence-stalls-in-january-2013-01-16, as measured by the Housing Market Index compiled by the ""National Association of Home Builders"":http://www.nahb.org/, was flat to December, breaking a string of eight straight monthly increases. The index ""reported Tuesday"":https://themreport.com/articles/led-by-south-builder-confidence-slips-in-feb-2013-02-19 for February dropped for the first time since last April.

According to the Census/HUD report, builders completed 565,000 single family homes in January, the strongest since June 2010, when builders rushed to complete work on homes so buyers could take advantage of the federal home buyer tax credit program. Completions, however, continue to far outpace new home sales. According to the latest Census-HUD report, the new home sales pace was 369,000 in December.

Total starts rose in the South and West while falling in the Northeast and Midwest, improving 34,000 in the West to 237,000 and 19,000 in the South to 483,000 while dropping 95,000 in the Midwest to 95,000 and 41,000 in the Northeast to 75,000.

Single-family starts rose 14,000 in the South to 331,000 and 6,000 in the West to 139,000 while dropping 10,000 in the Midwest to 93,000 and 5,000 in the Northeast to 50,000.

Total permits rose 10,000 in the Northeast to 109,000; 5,000 in the South to 452,000; and 2,000 in the Midwest to 143,000. The West was the only region to see a decline in permits, slipping 1,000 to 221,000. Permits for single family homes rose 8,000 in the West to 133,000 and 6,000 in the South to 304, 000 but fell 2,000 in the Northeast to 46,000 and 1,000 in the Midwest to 101,000.

_Hear Mark Lieberman every Friday on P.O.T.U.S. radio, Sirius-XM 124, at 6:40 a.m. and again at 9:40 a.m. EST._

About Author: Mark Lieberman

Mark Lieberman is the former Senior Economist at Fox Business Network. He is now Managing Director and Senior Economist at Economics Analytics Research. He can be heard each Friday on The Morning Briefing on POTUS on Sirius-XM Radio 124.

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