Housing production softened in January as increasing lumber prices continue to impact the housing industry, according to the National Association of Home Builders (NAHB) Overall housing starts dropped 6.0% to a seasonally adjusted annual rate of 1.58 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The January reading of 1.58 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts dropped 12.2% to a 1.16 million seasonally adjusted annual rate. The multifamily sector, which includes apartment buildings and condos, increased 17.1% to a 418,000 pace.

The Breakdown:
 
Housing Starts: 1.58 million (-6.0% month-over-month, +-2.3% year-over-year)
Multifamily Starts: 402,000
Single-Family Starts: 1,162,000
 
Building Permits: 1.88 million (+10.4% month-over-month, +22.5% year-over-year)
Multifamily Permits: 557,000
Single-Family Permits: 1,269,000
 
Completions: 1.35 million (-2.3% month-over-month, +2.4% year-over-year)
Multifamily Completions: 296,000
Single-Family Completions: 1,036,000

Regional Year-to-Date Data
 
Midwest: -12.3%
South: -2.5%
West:  -11.4%
Northeast: +2.3%
 
What the Industry Is Saying:

"Concerns over higher lumber prices produced softness for the housing market amid solid buyer traffic at the start of the year," said Chuck Fowke, chairman of the NAHB and a custom home builder from Tampa, Florida. "With the cost of building materials rising at a rapid pace, the challenge for builders is to keep home prices at an affordable level for buyers even as the regulatory policy environment may become more challenging."

"The weakness in housing starts in January is consistent with our recent builder surveys," said NAHB Chief Economist Robert Dietz. "Builders report concerns over increasing lumber and other construction costs and delays in obtaining building materials. Rising interest rates will also erode housing affordability in 2021, as existing home inventories remain low. It's also worth noting that the number of single-family homes permitted, but not started construction jumped to 114,000 units in January. This is 9.6% higher than December and 28.1% higher than a year ago, as building material cost increases and delays slow some home building."
 
"After a hot streak of construction in the latter half of last year, a modest pause should not be viewed as a slowdown in momentum," said Bill Banfield, Rocket Mortgage executive vice president of Capital Markets. "There is a lot of positive energy in the market—evidenced by intense demand to own a home—that will continue to support housing into 2021."

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