Weather Blamed for Freeze on Housing Starts
February 20, 2014
Construction on new single-family homes and apartments dropped 16 percent, to a seasonally-adjusted annual rate of 880,000 in January, the Commerce Department reports. This marks the second consecutive monthly drop in housing starts, as frigid winter weather puts a chill on the new-home recovery, according to the National Association of Home Builders.
Single-family housing starts posted a 15.9 percent decline in January, while the often volatile multifamily sector dropped 16.3 percent, according to the Commerce Department.
Housing starts dropped by the largest amount—70 percent—in the Midwest, which has been facing the brunt of the cold zap recently. The West, facing less severe weather conditions, still saw a 17 percent decline in housing starts, the Commerce Department reports. New-home permits for single-family homes – a gauge of future housing activity – fell slightly by 1.3 percent in January.
"Cold weather clearly put a chill on new-home construction last month, and this is also reflected in our latest builder confidence survey," says Kevin Kelly, NAHB chairman. "Further, builders continue to face other obstacles, including rising materials prices and a lack of buildable lots and labor."
The report follows on the heels of NAHB’s builder sentiment index that showed industry confidence plunged at its fastest rate in the 30-year history of the index. In the index, severe winter weather conditions were blamed again for changing builders’ outlook on the new-home market from “good” to “poor.”
While 2014 has been off to a chilly start in most parts of the country, the builders’ trade group still expects housing starts to total more than 1.1 million this year, up from 923,000 in 2013.
"Though the decline in starts is largely weather-related, it is worth noting that on the upside housing production for the fourth quarter was above 1 million for the first time since 2008 while single-family permits held relatively steady," says NAHB Chief Economist David Crowe. "The less weather-sensitive permits data suggests that our forecast for solid growth in single-family housing production in 2014 remains on track, as pent-up housing demand is unleashed."
The lack of inventory remains a major bottleneck to the housing recovery, notes Lawrence Yun, National Association of REALTORS®’ chief economist, on NAR’s Economists’ Outlook blog.
Existing-home inventory has been at a 13-year low, while new-home inventory sits near a 50-year low, he says. Yun notes that housing starts are far short of what they should be—at least 1.5 million annually, based on historical trends.
Yun says that inventory constraints can be relieved from an increase in new-home construction. But until then, he says home prices will likely be moving higher as a result of the shortage.
Updated: November 23, 2020