WASHINGTON (Reuters) – U.S. homebuilding fell more than expected in January amid soaring lumber prices, though a surge in permits for future construction suggested the housing market remains supported by lean inventories and historically low mortgage rates.
Housing starts decreased 6.0% to a seasonally adjusted annual rate of 1.580 million units last month, the Commerce Department said on Thursday. Economists polled by Reuters had forecast starts would drop to a rate of 1.658 million units in January. Homebuilding fell 2.3% on a year-on-year basis.
The housing market has outperformed other sectors of the economy during the COVID-19 pandemic, supported by lower mortgages rates and demand for spacious accommodations for home offices and schooling. But expensive inputs and lack of land pose a threat to continued robust housing market gains.
A survey on Wednesday showed confidence among single-family homebuilders edged up in February. But builders complained that record high lumber prices were “adding thousands of dollars to the cost of a new home and causing some builders to abruptly halt projects.”
Softwood lumber prices jumped a record 73% on a year-on-year basis in January, according to data from the Labor Department. Still, the housing market remains supported by historically low mortgage rates and lean inventories of previously owned homes.
Permits for future homebuilding shot up 10.4% to a rate of 1.881 million units in January. Permits typically lead starts by one to two months.
Single-family homebuilding, the largest share of the housing market, tumbled 12.2% to a seasonally adjusted annual rate of 1.162 million units. Single-family starts had increased for eight straight months. Single-family building permits rose 3.8% to a rate of 1.269 million units in January.
Starts for the volatile multi-family segment surged 17.1% to a pace of 418,000 units. Building permits for multi-family housing projects soared 27.2% to a pace of 612,000 units.
(Reporting By Lucia Mutikani; Editing by Andrea Ricci)