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Fewer homes were built last month as builders reported material bottlenecks that were slowing the pipeline of adding more new home inventory. Housing starts fell 4.1% in January to a seasonally adjusted annual rate of 1.64 million units, the Commerce Department reported Thursday. Building permits remain at a solid pace, however, signaling that buyer demand remains high.
Broken out, single-family housing starts fell 5.6% last month while the multifamily sector—which includes apartments and condos—fell 0.8%.
“The market needs more housing, but chronic production bottlenecks, including ongoing price increases for lumber and OSB (oriented strand board), continue to raise housing costs and harm housing affordability,” says Jerry Konter, chairman of the National Association of Home Builders. “In fact, the number of single-family homes under construction continues to rise as construction cycle times increase due to delivery delay with building materials.”
Combined single-family and multifamily starts saw the largest drops in January month-to-month in the Midwest, plunging nearly 38%, followed by a 2% decline in the South. Housing starts, meanwhile, edged up 17.7% in the West and by 2.6% in the Northeast.
Housing permits—a gauge of future construction—remained high. Single-family permits in January rose nearly 7%.
“The rise in permits, along with solid builder sentiment as measured in recent monthly surveys, suggests a positive start to the year given the recent rise in mortgage rates,” says Robert Dietz, NAHB’s chief economist. “Fueled by higher mortgage rates and construction costs, declining housing affordability will continue to affect the home building market in 2022.”