Housing Starts Tumble 7.9 Percent

The pace of new home construction slowed in the United States in January, the government said Feb. 18, as the red-hot housing market cooled from December’s 20-year-high pace.

But many economists noted that bad weather may have played a role in the decline and said the housing market is likely to stay relatively strong as long as interest rates stay low.

The Commerce Department said housing starts dropped 7.9 percent to a seasonally adjusted annual rate of 1.9 million units, after rising a revised 0.6 percent in December. Economists, on average, had expected housing starts to dip to a 2 million-unit pace, according to Briefing.com.

January’s pace was the slowest since last September, while December’s was the fastest since February 1984.

“There was a sharp decline in housing starts in January, but let’s not panic just yet,” said Joel Naroff, president of Naroff Economic Advisors. “Cold and snowy weather can take its toll on construction, and that may have been the case in January.”

Starts slowed more sharply in the Northeast and Midwest – hit by unusually bitter cold last month – than in the South and West, a hint that weather did play a role.

And building permits, a forward-looking indicator of housing demand, fell by a less precipitous 2.8 percent to an annual rate of 1.9 million units after rising 4.8 percent in December. The reading was about in line with economists’ forecasts, on average.

“The implication is that raw winter weather may have depressed starts last month, particularly late in the month,” UBS chief economist Maury Harris said in a research note. “Even so, starts remained above the 2003 average [of] 1.85 million [units].”

Source: CNN/Money