U.S. Housing Starts and Permits (January 2024)

Andrew Foran, Economist | 416-350-8927

Date Published: February 16, 2024

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U.S. housing starts and permits drop notably in January

  • Housing starts fell by 14.8% month-on-month (m/m) in January to 1.33 million (annualized) units, coming in well below the consensus forecast of 1.46 million. However, revisions to the two prior months were positive, adding roughly 89k units to the previous reported tallies.
  • The bulk of the pullback was concentrated in the multi-family segment, which fell by 35.6% m/m (or 181k units), compared to the more modest 4.7% m/m decline (or 50k units decline) in the single-family segment. Single-family starts have fallen for two consecutive months while multi-family starts fell to the lowest level since the onset of the pandemic after an outsized spike in December.
  • Residential permits fell by slightly more than expected in January – down 1.5% m/m to 1.47 million units. Single-family permits rose 1.6% m/m, marking the thirteenth consecutive month of increases, while multi-family permits fell by 7.9% m/m, continuing the trend of weakness seen over the past few months.
  • All four Census regions saw lower housing starts in January. Declines were led by the Midwest (-30.1% m/m), followed by the Northeast (-20.6% m/m), the West (-15.7% m/m), and the South (-9.7% m/m).

Key Implications

  • Homebuilding activity fell to start the year as an atypically sharp decline in the multi-family segment joined a pullback in single-family starts. Month-to-month volatility in the multi-family segment is common and a pullback from December's strong reading, which was revised higher by 75k units with this data release, was to be expected. Still, the segment faces headwinds in the form of high financing costs, slowing rent price growth, and a build-up of projects under construction from the past few years.
  • In contrast the single-family market has remained relatively stable, with January marking the third consecutive month of over 1 million starts (annualized). While the rise in interest rates since the start of the year has weighed on homebuilding, the National Association of Home Builders sentiment index rose to its highest level in six months in February on the back of expectations for Federal Reserve rate cuts in 2024. Lower financing costs and mortgage rates should benefit housing starts this year, but the bulk of this benefit is unlikely to occur until the second half of this year.