After Tuesday's big miss in home builder sentiment, today's release of Housing Starts and Building Permits for the month of January showed additional weakness. In the case of Housing Starts, economists were expecting a seasonally adjusted annualized rate (SAAR) of 1.07 million, but the actual rate was slightly weaker at 1.065 million, which was down from December's reading of 1.087 million last month. The miss in Building Permits was by a similar magnitude. Economists were expecting a SAAR of 1.067 million, but the actual level came in at 1.053 million, which was down from December's reading of 1.06 million.
The top part of the table below lists the breakdown of Housing Starts by both the size of unit and on a regional basis. Overall, Housing Starts dropped 2% month/month (m/m) but were up 18.7% year/year (y/y). The reason for the big improvement in the y/y reading was due to a big drop we saw last January when bad weather across the country suppressed housing activity. As shown in the breakdown between single and multi-family units, all of this month's weakness was in single family units, which dropped 6.7% while multi-family units actually rose 7.5%. Single family units are generally considered to have a greater economic benefit than multi-family units, so the weakness in January was a disappointment. Looking at the breakdown on a regional basis gives us some insight into why Tuesday's home builder sentiment report showed such weakness among home builders in the Midwest, as Housing Starts in that region dropped 22.2%!
At the bottom of the table, we have broken out Building Permits by type of unit and region. Similar to trends we saw in the figures for Housing Starts, Building Permits saw weakness in single family units relative to multi-family units. Additionally, on a regional basis the Midwest saw the most weakness (down 16% m/m), while the Northeast and West regions both saw double digit growth.