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Home Builders Remain Confident After Housing Starts Drop in January

Even though the housing market has seen great improvement since the financial crisis, some new home builders in the U.S. are conflicted after a recent drop in home starts, according to Equipment World. For the second consecutive month, January saw a decrease in home construction rates of about 3.8% to a seasonally adjusted rate of […]

Home Builders Remain Confident After Housing Starts Drop in January

Even though the housing market has seen great improvement since the financial crisis, some new home builders in the U.S. are conflicted after a recent drop in home starts, according to Equipment World.

For the second consecutive month, January saw a decrease in home construction rates of about 3.8% to a seasonally adjusted rate of 1.143 million annually.

That’s only 1.8% above the January rates of 2015 as shown by data from the Commerce Department.

Single-family starts fell 3.9% to a rate of 731,000, which was still up 3.5% from the previous year. Apartment starts, on the other hand, were down 3.8% from a year ago, falling 2.5% in January to 354,000.

A reliable measure of the trends in the home building industry are building permits, which also fell in January.

Permits fell 0.2% to 1.202 million, still holding at 13.5% above January 2015.

With the National Association Home Builders (NAHB)/Wells Fargo builder sentiment index is currently recorded at 58 — anything above 50 indicates the majority of home builders view the market is in good condition — builder confidence continues to cause strife in the midst of concerns over increasing labor and construction lot costs.

However, the NAHB stated that builders remain confident sales will soon pickup.

“Builders are reflecting consumers’ concerns about recent negative economic trends,” said NAHB chief economist David Crowe. “However, the fundamentals are in place for continued growth of the housing market. Historically low mortgage rates, steady job gains, improved household formations and significant pent up demand all point to a gradual upward trend for housing in the year ahead.”

There may also be another factor that could have a positive impact on the rates of housing starts: falling construction materials costs.

For Constructions Pros reports that construction input prices for materials such as nonferrous wire and cable, iron, steel, lumber, and asphalt, dropped 0.6% during January 2016 as stated by the Associated Builders and Contractors (ABC) analysis.

That makes for a decrease of about 2.7% from January of the previous year.

This drop in prices is a result of global deflationary forces, meaning growing volatility in many regional economies.

Even prices for nonresidential construction inputs have experienced a similar trend, falling 0.8% per month and 2.7% on an annual basis.

One of the driving forces behind this decrease has been related to energy, including the prices of crude petroleum, natural gas, and unprocessed energy materials.

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