New-home construction rebounded by more than expected in January amid strength in single-family starts and a nine-month high for permits, signaling the market is stabilizing thanks to lower mortgage rates.
Residential starts rose 18.6% to a 1.23 million annualized rate after a downwardly revised 1.04 million in the prior month, according to government figures Friday that were delayed two weeks by the federal shutdown. Permits, a proxy for future construction, rose 1.4% to a 1.35 million rate, compared with forecasts for a decline.
The data point to how lower borrowing costs are encouraging builders and supporting demand, which is also buoyed also by a solid labor market with rising wages and extra funds from tax cuts. Still, headwinds remain for developers, including elevated material prices and rising labor costs.
Single-family starts jumped 25.1%, the biggest one-month gain since 1979, to 926,000, though permits for the category fell 2.1% to the lowest level since August 2017. Starts for multifamily homes of five units or more, a category that tends to be volatile and includes apartment buildings and condominiums, rose 4% while permits were up 4.8%.
Other reports have showed reason for optimism in housing at the start of 2019, as pending home sales rose by more than forecast in January and the outlook among homebuilders picked up.
Three of four regions posted gains in starts, led by a 58.5% rise in the Northeast that was the most since June 2017. One sign that builders will stay busy in coming months: About 203,000 homes were authorized but not yet started in January, the most since May 2007. The data have a wide margin of error, with a 90% chance that the headline figure was between an 8% drop and 45.2% gain.
While responses were consistent with normal levels, the report said delays from the government shutdown may make it more difficult to determine exact start and completion dates. The report, released jointly by the Census Bureau and Department of Housing and Urban Development in Washington, was originally scheduled for Feb. 20. February figures are due on March 26.