2016 may not be a record-breaking year for the housing business, but the numbers so far point to solid and steady growth.
Figures just released by the U.S. Department of Housing and Urban Development (HUD) and the Census Bureau show new residential construction starts for January 2016 were at 1.099 million, a decrease of 3.8 percent compared with December, but an increase of 1.8 percent compared with the same time last year.
Starts fell in all four regions in January, with the Midwest, Northeast, South and West posting losses of 12.8, 3.7, 2.9 and 0.4 percent respectively.
“Despite the weaker than expected January readings, the trends affirm our view of solid but not record breaking growth in 2016,ˮ said realtor.com chief economist Jonathan Smoke.
“Demand for housing remains robust as a result of strong household formation. We expect total starts to grow to 1.23 million in 2016, which would be an increase of 11 percent over the final number reported for 2015. 1.23 million starts will be the highest year for starts since 2007.ˮ
According to Smoke, January is the slowest month of the year for new construction, so it’s not a good month to judge near-term trends.
“The key findings from the report is that, month-to-month, we’re seeing little change in new construction, but year-over-year there is solid growth. In addition, permits remain higher than starts, which is a good sign for expansion ahead,ˮ said the economist.
Starts were expected to see an increase in January following a strong December permit increase, but instead, January starts declined 3.8 percent.
However, that monthly decline was not statistically significant, according to the experts, meaning the monthly data were too thin and noisy to give a clear reading.
“We had a bumpy growth year in 2015, and many of the monthly reports lacked statistical significance,ˮ added Smoke. “This report repeats the pattern we are used to seeing. Of the monthly permit and starts data, only the monthly decline in single-family permits of 1.6 percent was statistically significant. The year-over-year changes in total permits (up 13.5 percent) and single-family permits (up 9.6 percent) were statistically significant.ˮ
The National Association of Home Builders (NAHB) wasn;t surprised by the numbers either.
“January’s production numbers are in line with our recent [research] and show that builders are being cautious as they face some market uncertainties and supply side constraints,” said Ed Brady, chairman of the NAHB.
“Despite the modest dip in starts this month, we expect to see ongoing, gradual growth in housing production in 2016,” added David Crowe, chief economist for NAHB.
“An improving economy, solid job creation and pent-up demand for housing should keep the market moving forward.”
NAHB reported that builder confidence in the market for newly built single-family homes fell three points to 58 in February from an upwardly revised January reading of 61 on its housing market index.
“Though builders report the dip in confidence this month is partly attributable to the high cost and lack of availability of lots and labor, they are still positive about the housing market,” Brady said. “Of note, they expressed optimism that sales will pick up in the coming months.”