New-home starts took a hit in January but remain higher than they were in November. And builders see a path forward to stronger sales, according to a new report from the U.S. Census Bureau.

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The road to recovery for homebuilders remained bumpy to begin the year, with the number of new single-family construction projects failing to build on a surprisingly strong December.

Housing starts of all types — including single-family and multifamily — clocked in at a seasonally adjusted annual rate of 1.3 million units in January, according to a report Thursday from the U.S. Census Bureau.

That’s a 4.5 percent decline in new residential units from the previous month, capping off a 21 percent drop since the first month of 2022 when mortgage rates were still not far from all-time lows.

The present higher-rate environment over the last year has taken a toll on demand for existing homes and new homes alike. But single-family builders have felt the sting more than most corners of the industry.

After experiencing significantly heightened sales and starts for most of the pandemic, the number of new single-family construction projects was down 27 percent year over year in January to a seasonally adjusted annual rate of 841,000 homes. 

That’s an improvement from the recent low point in November when builders were starting new projects at a seasonally adjusted rate of 807,000 homes per year. 

But it’s also well below the 968,000-home rate from January 2020 before the pandemic first upended the housing market.

In the recent winter months, the biggest move in residential construction has been a steep drop in new multifamily projects. 

Apartment construction and other multifamily projects had continued to rise throughout the recent housing market shift, even as demand for single-family homes began to fall off. But the seasonally adjusted annual rate of new multifamily units under construction dropped from 598,000 in November to 457,000 in December — a 24 percent decline in only two months.

During that same time, new single-family projects may have shown some signs of stabilization — albeit in a volatile pattern. 

The latest revised numbers show that new single-family starts rose 9 percent from November to December after months of decline, followed by a 4 percent drop the following month. That places them at seasonally adjusted levels about 4 percent higher than where they were in November.

After a dizzying market shift that’s cut heavily into sales, builders may finally be seeing light at the end of the tunnel.

The outlook for present and future sales improved greatly in a poll of builders conducted in February, according to the National Association of Home Builders. This measure of builder sentiment reflects present sales, foot traffic and outlook for future sales. It’s risen now for two consecutive months following 12 straight months of decline in 2022.

Email Daniel Houston

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