US housing starts opened 2021 with a 6% month-over-month decline in January – a sharp reversal from the recorded 5.8% gain in December – the US Census Bureau and the US Department of Housing and Urban Development announced Thursday.
Read more: US housing starts broke records in 2020
Overall housing starts were running at a seasonally adjusted annual rate of 1.58 million units last month, down 6% from the revised December estimate of 1.68 million. Single-family housing starts plunged in January, down 12.2% month over month to a 1.16million-unit rate.
“Despite a modest month-over-over decline, single-family housing starts are up 17.5% from one year ago,” said First American Deputy Chief Economist Odeta Kushi. “Single-family permits, a leading indicator of future starts, are up nearly 30% from one year ago. It’s still not enough to significantly narrow the gap between supply and demand, but it’s a step in the right direction.”
In January, housing completions dropped 2.3% to a seasonally adjusted annual pace of 1.34 million from December to January. However, it is still 2.4% higher than the January 2020 rate of 1.30 million units.
Despite several supply-side headwinds, other housing market fundamentals (strong demand, low rates, and positive builder sentiment) offer optimism as winter turns to spring, according to Kushi.
“These are good problems to have in the building industry because the challenge is tons of demand and a struggle to meet it with the supply. I’d much rather be in that position than where the home construction sector was during the Great Recession,” said First American Chief Economist Mark Fleming.