Highlights
•New home starts declined 8.5% in January from an upwardly revised 973,000 (from 954,000) in December to 890,000. The Briefing.com consensus expected new home starts to decline to 914,000.
Key Factors
•The drop in starts is more likely due to volatility than a shift in construction trends. The number of homes currently under construction, which factors into GDP, remained on a solid positive track, increasing 1.5% to 557,000. That was the 17th consecutive monthly increase and is 34.9% above the August 2011 trough.
•Single-family construction increased 0.8% to 613,000 in January from 608,000 in December. That was the most single-family homes started since 615,000 single-family homes were started in July 2008.
•Multi-family starts fell from 365,000 in December to 277,000 in January.
•The concern going forward is whether home builders continue to price new homes at a substantial premium to a comparable existing home. The premium is double what it was prior to the housing boom, raising the risk that price-conscious buyers will shift toward the cheaper existing homes unless new homes become more competitive.
Big Picture
•The number of homes under construction has increased at a steady pace since August 2011 and shows no signs of abating. There is now clear evidence that the homebuilding sector is finally on a stable, upward trend.
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