The January 2018 joint report by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development on new residential construction offers some good news for the inventory-deprived housing market.
Privately-owned housing starts made solid gains in January with 9.7 percent growth month-over-month, and 7.3 percent growth year-over-year, to a seasonally adjusted rate of 1,326,000. Single-family housing starts edged up slightly to a rate of 877,000, a 3.7 percent month-over-month increase from December’s 846,000. Overall building permits were up 7.4 percent year-over-year, and also saw 7.4 percent month-over-month growth from December. Single-family housing permits, however, were at a rate of 866,000, a 1.7 percent decrease from December.
Lastly, privately-owned housing completions decreased 1.9 percent month-over-month and increased 7.7 percent year-over-year to a rate of 1,166,000. Single-family completions were at a rate of 850,000 — 2.2 percent above December’s rate of 832,000.
National Association of Realtors (NAR) chief economist Lawrence Yun says the jump in starts will help slow home price growth, but much more activity is still needed to make a long-term change.
“Terrific news on housing starts in January with a solid 10 percent gain,” said Yun in an emailed statement. “This rise in single-family housing construction will help tame home price growth, and the increase in multifamily units should continue to help slow rent growth. The large gain in housing starts in the West (10.7 percent) is especially welcomed, as that region has been facing acute housing shortages. Ultimately, there is still large room for improvement given the fact overall housing inventory is currently near historic lows.”
Furthermore, Yun said the increase in housing starts should also have a positive impact on mortgage rates.
“This boost in housing supply not only helps the economy, but may also help the Federal Reserve temper the pace of future short-term rate hikes,” he said. “That’s because the slow upward creep in the broad consumer price inflation is principally being driven by rising housing costs. Simply put, more housing supply means a lower inflation rate, and potentially a slower pace of interest rate increases by the Fed.”
About the report
The metrics in the New Residential Construction report measure new, privately owned housing units, excluding manufactured (mobile) homes. The U.S. Census Bureau and HUD collect the data from the Building Permits Survey and from the Survey of Construction, which is partially funded by HUD.
The Building Permits Survey produces estimates of the number of permits issued for new housing units based on a mail survey of a sample of permit offices. The Survey of Construction produces monthly estimates of housing starts and completions; Census Bureau field representatives sample individual permits within a sample of permit offices and then interview the builders or owners who took out the sampled permits to obtain start and completion date, as well as sale dates and characteristics, such as size and number of bedrooms.
Field representatives also drive roads looking for new residential construction activity in land areas where building permits are not required.