New residential construction in the U.S. fell by more than anticipated in the month of January, according to a report released by the Commerce Department on Wednesday, with the decrease largely due to a sharp drop in multi-family housing starts.
The report said housing starts fell 8.5 percent to a seasonally adjusted annual rate of 890,000 in January from the revised December estimate of 973,000. Economists had expected housing starts to drop to 914,000 from the 954,000 originally reported for the previous month.
The pullback by housing starts came after new residential construction reached its highest level in over four years in December.
Despite the monthly decrease, housing starts in January were still up by 23.6 percent compared to the rate of 720,000 in the same month a year ago.
Additionally, the monthly drop in housing starts was largely due to weakness in the volatile multi-family starts category.
While multi-family starts fell 24.1 percent to an annual rate of 277,000, single-family starts edged up 0.8 percent to a new four-year high of 613,000.
Jennifer Lee, senior economist at BMO Capital, said, "Despite the January pullback in housing starts, underlying fundamentals continue to support this important sector and will help push starts higher in the year ahead."
The report also showed that building permits, an indicator of future housing demand, rose 1.8 percent to an annual rate of 925,000 in January from the revised December rate of 909,000.
With the increase, building permits are at their highest level since June of 2008 and up 35.2 percent compared to January of 2012.
Tuesday morning, the National Association of Home Builders released a separate report showing that homebuilder confidence has unexpectedly deteriorated in the month of February.
The report said the NAHB/Wells Fargo Housing Market Index edged down to a reading of 46 in February from 47 in January. The modest drop by the Housing Market Index came as a surprise to economists, who had expected the index to inch up to 48.
NAHB Chief Economist David Crowe, said, "Having risen strongly in 2012, the HMI hit a slight pause in the beginning of this year as builders adjusted their expectations to reflect the pace at which consumers are moving forward on new-home purchases."
"The index remains near its highest level since May of 2006, and we expect home building to continue on a modest rising trajectory this year," he added.
by RTT Staff Writer
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