Ashesha Mehrotra

Construction of new homes unexpectedly dipped in January, as builders dialed back starts of single-family and multi-family homes.

Housing starts declined 3.8 percent to a seasonally adjusted 1.1 million annualized rate, a Commerce Department report showed Wednesday. That number fell short of the 1.17 million rate economists surveyed by Bloomberg had been expecting.

The drop last month was led by a 3.9 percent decrease in construction of single-family houses to a 731,000 annualized rate. In the more volatile apartments and condominiums sector, starts 3.7 percent decrease to368,000 in the construction of.

U.S. housing starts 2011-2015

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The soft housing-starts report came one day after a survey showed that homebuilders were not upbeat about the market.

Even so, a number of economists offered e a positive outlook for single-family homes, and predict an upward growth in the sector in times to come.

“The single-family data have turned softer lately, but there are still a lot of favorable fundamentals in place for the housing market and it looks like permits continue to trend higher over time,” said Daniel Silver, economist at J.P. Morgan.

Permits precede the starts data, so increases in permits are favorable for upcoming construction activity, he added.
Applications for building permits were down just 0.2 percent in January, to a seasonally adjusted 1.2 million annualized rate.

“Retail construction has still plenty of upside as housing supply remains very tight in many major markets,” said Robert A. Dye, chief economist at Comerica Bank.

Experts also said that slump in construction activities last month can be relegated to harsh weather conditions, especially the East Coast snow storm at the end of January.

Regionally, the Midwest marked the biggest decline last month at 12.8 percent. Starts also fell 3.7 percent in the Northeast, 2.9 percent in the South and 0.4 percent in the West, the report stated.