U.S. new-home construction rebounded by more than expected in January amid strength in single-family starts and a nine-month high for permits, signaling the market is stabilizing thanks to lower mortgage rates.
Residential starts rose 18.6% to a 1.23 million annualized rate after a downwardly revised 1.04 million in the prior month, according to government figures March 8 that were delayed two weeks by the federal shutdown. Permits, a proxy for future construction, rose 1.4% to a 1.35 million rate, compared with forecasts for a decline.
The data point to how lower borrowing costs are encouraging builders and supporting demand, which also is buoyed by a solid labor market with rising wages and extra funds from tax cuts. Still, headwinds remain for developers, including elevated material prices and rising labor costs.
Single-family starts jumped 25.1%, the biggest one-month gain since 1979, to 926,000, though permits for the category fell 2.1% to the lowest level since August 2017. Starts for multifamily homes of five units or more, a category that tends to be volatile and includes apartment buildings and condominiums, rose 4% while permits were up 4.8%. Other reports have showed reason for optimism in housing at the start of 2019, as pending home sales rose by more than forecast in January and the outlook among homebuilders picked up.