Construction on new U.S. homes took an astonishing nosedive in January, dropping 16% to a seasonally adjusted annual rate of 880,000, according to the U.S. Census Bureau.
Those declines occurred in both the single-family and multifamily construction sectors. This comes a day after the National Association of Home Builders housing index for January was released showing a stunning drop in builder confidence.
This month’s rate was the lowest in four months and down 2% from January 2013.
Analyst were surprised by the scope of the drop. Many chalked much of it up to weather, even though as has been pointed out the numbers are seasonally adjusted and should account for the effect of the weather. For an even more critical look at the weather question, click here.
Weather also can’t account for the fact that building permits dropped 5.4%, missing analyst expectations by the greatest amount since June 2013.
Furthermore, the largest drop in permits came in the western region, which saw a 26% decline despite mild weather for most of January.
Starts of single-family homes fell 15.9% to 573,000 with condos similarly in line, down 16.3% to 307,000.
Starts in the South, which is by far the largest region for this report, fell 12.5%, with the West, the second largest region, showing a 17.4% decline.
Permits show a smaller decline and probably more closely reflect the underlying trend for the new home market.
Permits fell 5.4% to a 937,000 unit rate with single-family homes showing relative strength, down only 1.3%. But permits for condos fell steeply, down 12.1%. Regionally, the South shows a 3.4% gain while the West shows a big decline, down 26%.
Heavy weather so far this month looks to pull down activity for February as well.
Existing home sales for January, which look to fall steeply based on a very weak pending home sales report, will be released on Friday.