Macro Flash Report

Housing Sector

Takeaway:

January weather clearly impacted the housing data, with a worse than expected decline in starts. Permits remain in a healthy position and suggest continued activity in new residential construction in 2025.

 

Housing Starts & Building Permits

In January, Housing Starts dropped by -9.8% to an annualized rate of 1,366k units from an upwardly revised 1,515k in December (a 10-month high), missing the market expected 1,390k. However, given the unseasonably cold January across the U.S., the divergence between this and permits should not be considered too surprising.

• Multi-family projects saw a steep decline (-11% to 355k), while single-family also experienced a decrease (-8.4% to 993k).

Building Permits, a forward-looking indicator of construction activity, rose by 0.1% to an annualized rate of 1,483k in January according to preliminary results, exceeding the forecasted fall to 1,460k and slightly up from 1,482k in the prior month.

• The primary driver was authorizations for 2-4 units soaring (+13.2% to 60k), offsetting a drop in multi-family approvals (-1.4% to 427k). Single-family permits remained unchanged (996k).

The NAHB Housing Market Index, a gauge for single-family homebuilder sentiment, fell to 42 in February, well below the anticipated edge lower to 46 from January’s 47. This marks the lowest reading in five months, being dragged down by policy uncertainty, particularly on tariffs, as well as elevated mortgage rates and high housing costs. The three indices were all down:

• Current sales conditions: -4 points to 46.
• Sales expectations in the next six months: -13 points to 46, the lowest level since December 2023.
• Traffic of prospective buyers: -3 points to 29.