Housing Starts: Swiftly Lower Amid Higher Rates

Bottom Line:  Housing starts started the year on a slower note as mortgage rates increased. Falling more than expected in January, starts saw slight positive revisions. While this report was not enough to change the solid uptrend in housing starts, it suggests higher mortgage rates are starting to impact the market for new residential construction. Supply remains tight, and demand remains solid, if modestly weaker amid lower affordability due to higher mortgage rates and higher prices. Overall, the growth tailwind from housing in 2021 was well below 2020's pace and looks likely to slow further and now has the potential to turn to a slight drag by late in the 1st Quarter.Housing Starts FELL by 4.1% in January to 1638k, compared with market expectations for a decline to 1695k. Meanwhile, the prior month was revised slightly higher from 1,702k to 1,708k.  Housing starts are now 0.8% ABOVE their year-ago level.  However, they are still a sharp 27.9% BELOW their January 2006 peak.Single-Family Housing Starts FELL by 5.6% to 1116k. Single-family housing starts are 2.4% BELOW their year-ago level but still 38.8% BELOW their January 2006 peak.Multifamily Housing Starts FELL by 0.8% to 522k. Multifamily starts are now 8.3% ABOVE their year-ago level.