Home-building activity blew by expectations in January, with housing starts up 9.7 percent to a rate of 1,326,000, according to the latest data from the U.S. Census Bureau and the Department of Housing and Urban Development (HUD). Single-family housing starts increased 3.7 percent to 846,000. Starts for units in buildings with five units or more came in at 431,000.
Additionally, permits increased 7.4 percent from December to 1,396,000, according to the data. Single-family permits were down 1.7 percent, however, to 866,000, while permits for units in buildings with five units or more came in at 479,000.
Completions totaled 1,166,000 in January, falling 1.9 percent. Single-family completions increased 2.2 percent to 850,000, while completions for units in buildings with five units or more came in at 305,000.
“Terrific news on housing starts in January with a solid 10 percent gain,” said Lawrence Yun, chief economist of the National Association of REALTORS® (NAR), in a statement. “This rise in single-family housing construction will help tame home price growth, and the increase in multi-family units should continue to help slow rent growth. The large gain in housing starts in the West (10.7 percent) is especially welcomed, as that region has been facing acute housing shortages. Ultimately, there is still large room for improvement given the fact overall housing inventory is currently near historic lows.”
According to Yun, the ascent could cause the Federal Reserve to hit pause on rates. It will announce its decision to hold or raise them in March.
“This boost in housing supply not only helps the economy but may also help the Federal Reserve temper the pace of future short-term rate hikes,” Yun said. “That’s because the slow upward creep in the broad consumer price inflation is principally being driven by rising housing costs. Simply put, more housing supply means a lower inflation rate, and potentially a slower pace of interest rate increases by the Fed.”