U.S. housing starts recorded their biggest drop in almost 3 years in January, as the third consecutive month of declines in permits confirmed weakness in the housing market. The Commerce Department said Wednesday new permits plummeted 16 percent to a seasonally adjusted annual rate of 880,000 units, which is the lowest level since September.
The percentage drop, alone, was the largest since February 2011.
Economists claim permits were likely weighed down by harsh weather this winter, as if winter has never been cold to the point people will pass on new construction when given the opportunity. Meanwhile, December housing starts were revised up to a 1.05 million-unit pace from the previously reported 999,000-unit rate.
The Commerce Department reports missed expectations, as economists polled by Reuters had expected starts to fall to a 950,000-unit rate in January. Despite the claims, not all of the weakness can be laid at the feet of the cold weather, considering evidence the economy was already losing momentum towards the end of the fourth quarter has been vast.
U.S. homebuilder confidence suffered its largest one-month drop ever in the month of February, falling below the key 50 mark for the first time since May. The markets were shaken on homebuilder confidence data that followed the Empire State’s manufacturing index showing that sector took a beating in the month, as well.
Further, while the Midwest gauge took a beating, the Northeast gauge shot up to the highest level since August 2008, debunking the cold weather explanation.
Single-family homes, the largest segment of the market, fell 15.9 percent to a 573,000-unit pace in January. That was the lowest level since August 2012. Starts for the volatile multi-family homes segment dropped 16.3 percent to a 307,000-unit rate.
Permits to build homes fell 5.4 percent in January, the largest drop in since June, to a 937,000-unit pace. Permits for single-family homes slipped 1.3 percent. Multifamily sector permits declined 12.1 percent.
