The Wall Street Journal reports, "'U.S. housing starts fell 16% last month to a seasonally adjusted annual rate of 880,000, the lowest level since last September, the Commerce Department said Wednesday. That was down from an upwardly revised December rate of 1.05 million new homes built, marking the largest month-over-month decline since February 2011. Starts on single-family homes sank 15.9% in January to an annual pace of 573,000.
Building permits, a sign of future construction, fell 5.4% to a seasonally adjusted annual rate of 937,000 last month from December's upwardly revised rate of 991,000.
Economists surveyed by Dow Jones had expected smaller declines in both measures, predicting housing starts would fall 4.9% to 950,000 and building permits would fall 1.1% to 980,000''.
Winter weather likely dragged down the housing sector in January after strong growth throughout most of 2013. Many economists already have blamed cold and snow in the eastern U.S. for a weaker-than-expected performance by retailers and factories this winter.
But some of the figures suggest more than just the weather may be at work.
The pace of housing starts last month actually rose in the chilly Northeast by 61.9%. But it fell 67.7% in the Midwest to the lowest pace on record. Starts also fell 12.5% in the South and 17.4% in the West, which has experienced relatively warm weather.
"While we believe the weather did impact construction activity, we think this is just part of the story, as the new construction slowdown was more broad-based," BNP Paribas economist Yelena Shulyatyeva wrote in a note to clients.
Building permits were still up 2.4% in January from a year earlier, though housing starts last month were down 2% from a year ago.
The report prompted several economists to lower their predictions for first-quarter
economic growth. Macroeconomic Advisers cut its forecast by a tenth of a percentage point to an annualized 1.7%. Barclays Capital lowered its forecast by 0.3 percentage point to an annual rate of 1.9%.
As winter weather abates, "we expect that some of the softness in private residential construction will be reversed in the coming months, most likely in the second quarter," Barclays chief U.S. economist Michael Gapen wrote in a note to clients.
The U.S. housing market's recovery showed signs of cooling in the second half of 2013 as prices rose and the Federal Reserve began pulling back its bond-buying program, which is aimed at lowering borrowing costs. A 30-year, fixed-rate mortgage had an average interest rate of 4.43% in January, up from last May's average of 3.54%, according to Freddie Mac.
PulteGroup Inc., one of the largest U.S. home builders, budgeted $2 billion for spending on land this year, up from $1.3 billion in 2013. "Our decision to increase investment into the business is consistent with our view that U.S. housing continues to advance to a sustained multiyear recovery," Chairman and Chief Executive Richard Dugas said on a Jan. 30 earnings call.
But home-builder confidence took a hit in February, falling to its lowest level since last May, according to a National Association of Home Builders survey released Tuesday.
