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Housing starts declined in January, falling short of expectations, while housing completions saw an uptick, according to data released Wednesday by the U.S. Census Bureau and the Department of Housing and Urban Development (HUD).
Both single-family and multifamily home construction slowed compared to December.
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Multifamily housing starts fell 9.8 percent from December to January, reaching a seasonally adjusted rate of 1,366,000 — also down 0.7 percent from January 2024. Single-family housing starts fell 8.4 percent month over month, bringing the seasonally adjusted rate to 993,000.
First American Deputy Chief Economist Odeta Kushi attributed the slowdown to multiple factors, including high mortgage rates and builder uncertainty. In January, threats of tarrifs may have also been a factor.
Odeta Kushi
“A colder than usual January, mortgage rates crossing the 7 percent threshold in January, and builder pessimism reflecting lingering supply-side and affordability headwinds combined to drag housing starts down in January,” Kushi said in a statement.
Multifamily permits reached an annual rate of 1,483,000 in January, up just 0.1 percent from December but down 1.7 percent from the previous year. Single-family authorizations remained unchanged from December, holding steady at an annually rate of 996,000.
New Housing Units Started in the U.S. | U.S. Census Bureau
The stagnation in permits reflects growing concern among builders. “Permits were flat on a monthly basis reflecting builder concern. Builder sentiment dipped in February to the lowest level since September,” Kushi said.
“Importantly, optimism about single-family sales expectations for the next six months plummeted, dropping 13 points into negative territory. This marks the largest one-month decline since the early months of the COVID-19 pandemic. Apart from the early months of the pandemic, it is the biggest drop in the history of the series, which dates back to 1985.”
Despite these challenges, housing completions increased, demonstrating some resilience in the market.
Multifamily completions rose 7.6 percent from December to January, reaching a seasonally adjusted rate of 1,651,000 — 9.8 percent higher than the previous year. Single-family completions also saw gains, rising 7.1 percent to a rate of 982,000.
“Higher rates, all else held equal, reduce consumer house-buying power and increase financing costs for builders,” Kushi said. Additionally, builders continue to grapple with challenges stemming from the ‘5 Ls’: labor, lots, legal issues, lumber, and lending. Uncertainty regarding tariffs further weighs on builder sentiment.”
Still, the new-home market remains a bright spot amid broader housing struggles. “Builders can offer mortgage rate buydowns, making monthly payments more manageable, and offer upgrades on interior quality features,” Kushi added, suggesting that strategic incentives could help offset affordability concerns.
