Permits for new houses rose to a more than 12-year high in January as builders began shifting into high gear amid a property shortage.
Single-family home authorizations, as permits are known, jumped to 987,000 at a seasonally adjusted annual pace, the highest since June 2007, the Commerce Department said on Wednesday. The January rate was a gain of 6.4% from December.
Overall permits, including multifamily units and single-family homes, jumped 9.2% to an annual pace of 1.551 million, the highest level since March 2007.
Housing starts, recorded when the construction crews begin working, dropped 3.6% to a seasonally adjusted annual rate of 1.567 million units in January, following three consecutive months of increases, the Commerce Department said.
Overall, the construction report was stronger than expected, according to Goldman Sachs economists. As a result of the building data and a separate report on wholesale prices also released on Wednesday, the investment bank added one-tenth of a percentage point to its GDP estimate for the first quarter, it said in a note to clients. It’s now forecasting GDP will increase by 1.5%.
“The level of housing starts declined by less than expected,” the Goldman Sachs note said, “and the very strong December level was revised up even higher.”
Builders are getting off the sidelines amid a critical housing shortage. The inventory of homes for sale at the end of December was 1.4 million, down 15% from November and a drop of 8.5% from a year earlier, according to the National Association of Realtors.
Unsold inventory totals have dropped for seven consecutive months from year-ago levels, taking a toll on home sales.
Mortgage rates near record lows and a strong jobs market can’t help buyers find a property if there aren’t enough homes to go around, said Lawrence Yun, NAR’s chief economist.
“More construction will mean more housing inventory for consumers in the later months of this year,” Yun said.
In other words, not soon enough to help the spring market.
“Spring months could still be quite tough for buyers since it takes time to convert housing starts into actual housing completions,” Yun said. “As trade-up buyers move into these newly completed homes in the near future, their existing homes will be released onto the market.”