U.S. home starts fall 3.8% in January as builders remain conflicted about market’s prospects

Updated Feb 18, 2016

home builderU.S. home starts fell for a second consecutive month in January as builder confidence in the market continued its decline.

Construction on new homes fell 3.8 percent in January to a seasonally adjusted annual rate of 1.143 million, according to preliminary data from the Commerce Department. That rate is 1.8 percent above the January 2015 figure.

Single-family starts fell 3.9 percent to a rate of 731,000, up 3.5 percent from a year ago, while apartment starts fell 2.5 percent to 354,000, down 3.8 percent from a year ago.

Building permits, a good barometer of how the homebuilding industry is trending, also fell during January, down 0.2 percent to 1.202 million. Permits remain 13.5 percent above the January 2015 estimate.

Meanwhile, builder confidence in the market continues to fall over concerns of increasing labor and lot costs. After spending most of the last year in the 60s, the National Association Home Builders/Wells Fargo builder sentiment index fell to a reading of 58 in January. Any reading above a 50 indicates most home builders believe market conditions are good.

However, as NAHB chairman Ed Brady noted in the organization’s release, homebuilders did express “optimism that sales will pick up in the coming months.”

“Builders are reflecting consumers’ concerns about recent negative economic trends,” added NAHB chief economist David Crowe. “However, the fundamentals are in place for continued growth of the housing market. Historically low mortgage rates, steady job gains, improved household formations and significant pent up demand all point to a gradual upward trend for housing in the year ahead.”