Privately-owned housing starts fell in January to a seasonally adjusted annual rate of 1,580,000 (Census Bureau)
- M-O-M: This is 6.0% below the revised December estimate of 1,680,000
- Y-O-Y: This is also 2.3% below the January 2020 rate of 1,617,000
The currently most popular real estate option, single-family housing, saw starts in January drop 12.2% from the December figure of 1,323,000
There is some good news for current homebuyers looking for more supply. Single-family housing completions in January were up 10% from December’s revised rate of 942,000.
- There is also some good news for future homebuyers as Privately-owned housing permits were up 10.4% above the revised December rate and up 22.5% when compared to January 2020.
So if finished houses and building permits are up, why are housing starts down? Simple, lumber prices. CNBC reported that Softwood lumber prices jumped a record 73% on a year-on-year basis in January, according to data from the Labor Department.
Lumber prices, along with dwindling supplies, were cited as concerns earlier this week by the National Association of Homebuilders as a potential problem. (NAHB)
- NAHB Chairman Chuck Fowke said in a statement, “Lumber prices have been steadily rising this year and hit a record high in mid-February, adding thousands of dollars to the cost of a new home and causing some builders to abruptly halt projects at a time when inventories are already at all-time lows,”
The quickest way to lower costs is to remove all tariffs on lumber. Fortunately in December, The Commerce Department announced that it had reduced its duties on shipments of Canadian lumber from 20% to 9%. Nine is better than twenty but zero would be even better.
Homebuilder confidence remains high inching up one point to 84 in February, according to the latest NAHB/Wells Fargo Housing Market Index. Demand is also strong as is evident by the double-digit growth of building permits. However, lumber prices are putting a dent in homebuilder profits. Double-digit housing appreciation certainly helps, but if lumber prices don’t stabilize we could continue to see starts dip despite an increase in permits.