Housing Starts plunge in January

Summary

Road ahead filled with obstacles

Total housing starts declined sharply in January, with single-family and multifamily starts both falling markedly during the month. A small improvement in permits suggests the drop in ground-breakings largely was owed to adverse weather. However, a broad-based pullback in home builder confidence during February is a reminder of the challenging road ahead for single-family construction. On top of high interest rates and elevated inventory levels, new trade and immigration policies stand to reintroduce supply chain uncertainty and constrain new production.

The changing policy landscape may be a limitation for multifamily construction as well. That noted, multifamily permits look to have stabilized after contracting sharply over the past several years, and it now looks as though apartment and condo construction has found a floor. A modestly improved pace of activity moving forward seems likely as high ownership costs continue boost renter demand amid a depleted project pipeline. Meanwhile, less restrictive monetary policy and better access to capital for developers should also be tailwinds.

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