US housing construction down 16 percent in January

Published on NewsOK Modified: February 19, 2014 at 8:22 am •  Published: February 19, 2014
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WASHINGTON (AP) — U.S. home construction fell in January for a second month but the weakness in both months reflected severe winter weather in many parts of the country. The expectation is that housing will deliver another year of solid gains, helped by an improving economy.

Builders started work at a seasonally adjusted annual rate of 880,000, down 16 percent from December, the Commerce Department reported Wednesday. In December, construction had fallen 4.8 percent. The declines in both months were blamed largely on the weather.

Applications for building permits fell in January for a third month, dropping 5.4 percent to a rate of 937,000.

For all of 2013, housing construction rose 17.7 percent to 976,000 units, the best showing since 2007. Analysts expect further gains this year as stronger job growth boosts demand.

For January, both single-family and apartment construction fell. Single-family building dropped 15.9 percent to a rate of 573,000 while apartment construction was down 16.3 percent to 307,000.

By region of the country, construction shot up 61.9 percent in the Northeast after two months of declines but was down in every other region of the country. Construction fell 67.7 percent in the Midwest to a record low of 50,000 units at an annual rate. The records go back to 1960. That big decline likely reflected the impact of severe weather in the Midwest in January. Construction was down 12.5 percent in the South and 17.4 percent in the West.

Economists said bad weather likely played a large role in the construction declines.

"Weather in December and January took its toll on housing and February may not see much improvement," said Jennifer Lee, senior economist at BMO Capital Markets. She predicted a rebound in construction when spring arrives.

The expectation is that housing construction will rise for a fifth consecutive year, helped by further gains in employment and relatively low mortgage rates. Rates hit record lows in early 2013 but then they started rising as the Federal Reserve sent signals that it might begin to curtail its monthly bond purchases.

The Fed reduced those purchases in December and January, trimming them by $20 billion to $65 billion per month. Analysts expect the Fed will keep reducing the bond purchases in similar $10 billion moves at each meeting this year until eliminating the program in December.