The latest US jobs report had some distressing news, this week, showing that the economy is not adding jobs at pace that follows analyst expectations. While this might actually be a sign that things are improving—because there are so few people looking for work, hopefully—one thing that might indicate a recovery is the rise in homebuilding. Apparently US homebuilding increased at a higher rate than expected in January, finally ending four straight months of decline in single-family housing construction.
Taking a closer look at the numbers, housing starts did see a jump of nearly 19 percent—to a seasonally adjusted annual rate of 1.230 million units—in January. In addition, the United States Department of Commerce said that December’s data has been revised down to reflect a declining rate of 1.037 million units instead of the 1.078 million units that had been originally reported.
At the same time, building permits of these units did fall to their lowest level since the middle of 2017, despite rising by 1.4 percent (to a rate of 1.345 million). This was driven largely by a jump in permits within the more volatile multi-family housing segment of the industry.
It is important to observe the difference between single-family and multiple-family housing. Single-family homebuilding, of course, accounts for the majority of the overall US housing market. This sector—again, the largest in the market—grew by slightly more than 25 percent to 926,000 units, in January. This is actually the highest such growth since May of 2018. More importantly, it comes after four consecutive months of decline.
On the other hand, single-family homebuilding permits fell 2.1 percent, in January, at the pace of 812,000 units. This is the lowest level of such growth since August of 2017. These numbers suggest a definite weakness in single-family homebuilding is on the horizon.
On the other side of this, however, multi-family housing starts grew by 2.4 percent, at the pace of 304,000, in January. And on top of that, multi-family home construction permits grew more than 7 percent, at a rate of 533,000 units.
Overall, then, these incremental changes appear to indicate that we should see a modest increase in sales this year. And that will be a welcomed change from the slow market of 2018, which was hindered by rising mortgage rates and uncertain economic stability.