January Housing Starts: Housing Permits Slightly Rebound With Lower Rates

• Housing starts dropped to 1.31 million in January, down 4.5% from revised December 2022 figures and down 21.4% from January 2022, according to the U.S. Census Bureau. 
• Housing permits issued in January were up 0.1% from December and down 27.3% from a year ago, to 1.34 million (SAAR). 
• 1.41 million (SAAR) homes were completed in January, up 1.0% from December and up 12.8% year-over-year.

Interest rates dipped in January, causing purchase applications to surge as buyers who were unlocked by the change in affordability jumped at the opportunity to get back in the market. Homebuilders responded to the slight rate drop as well, increasing not only builder confidence for the first time in over a year, but also slightly increasing housing permits - mainly for 2-4 unit buildings, a typically more affordable housing type - from December to January. With mortgage rates back up in February, it’s likely that this momentum will be short lived. Especially as homebuilders still seem to be sluggish to start new projects, with housing starts still falling in January for the fifth straight month. Even if affordability does improve for potential homebuyers, the lackluster flow of existing home listings coming onto the market leaves few options to be picked over. Thankfully, the backlog of new construction homes from the permits pulled at the height of the construction boom in 2021 and 2022 is finally making its way to market, and with many builders offering incentives like rate buydowns, buyers might have more options and flexibility pursuing new construction homes in the fast approaching spring home shopping season, boosting new construction sales – hopefully enough to keep builder confidence up and builders building to add the much needed inventory to this market.