U.S. Housing Starts Plunge 9.8% in January, Raising Market Concerns

U.S. Housing Starts Plunge in January, Raising Concerns for Construction Sector

The latest data from the U.S. Census Bureau and the Department of Housing and Urban Development (HUD) reveals a sharp decline in housing starts for January 2025. With a seasonally adjusted annual rate of 1.366 million units, new housing construction fell by 9.8% compared to December’s revised estimate of 1.515 million units. This significant drop raises concerns about the strength of the residential construction sector, particularly as single-family starts also suffered an 8.4% decline.

Building Permits Show Stagnation

Despite the drop in housing starts, building permits remained relatively stable. The number of privately-owned housing units authorized by permits stood at 1.483 million, a marginal 0.1% increase from December but still 1.7% below the January 2024 level. Single-family authorizations remained flat at 996,000, indicating little growth momentum. However, multifamily permits for buildings with five or more units saw a slight dip to 427,000.

Housing Completions Surge, Creating Supply Pressure

In contrast to the slowdown in new construction, housing completions surged in January, reaching 1.651 million units, a 7.6% increase from December and 9.8% higher than a year ago. Single-family completions climbed by 7.1% to 982,000 units, while multifamily completions surged to 652,000 units. The increase in completed homes could put downward pressure on housing prices, especially if demand weakens amid economic uncertainty.

Regional Weakness Signals Broader Slowdown

The decline in housing starts was widespread across different regions. The Midwest and South experienced the steepest drops, with single-family starts down 10.4% and 9.2%, respectively. Meanwhile, the West posted a surprising 42.3% increase in multifamily starts, offsetting some of the national decline. The Northeast remained weak, reflecting ongoing affordability and supply chain issues.

Market Outlook: Bearish for Homebuilders, Mixed for Housing Prices

The sharp decline in housing starts signals potential headwinds for homebuilders and suppliers. If permits fail to gain traction in the coming months, construction activity could remain subdued. However, the surge in housing completions suggests that inventory is expanding, which may ease price pressures in some overheated markets. Traders should monitor upcoming economic indicators and mortgage rates for further clues on the sector’s direction.