Signs of Choppiness in Residential Construction
• Housing Starts fell by 6.0 percent in January to a 1,558,000 unit annual rate.
• Housing Permits jumped by 10.4 percent in January to a 1,881,000 unit annual rate.
• Initial Claims for Unemployment Insurance gained 13,000 for the week ending Feb. 13, to hit 861,000.
Total housing starts fell back 6.0 percent in January, normalizing to a 1,580,000 unit annual rate after a strong gain in December. Single-family starts pulled back by 12.2 percent to a 1,162,000 unit annual rate, still well above the average rate for 2020. Multifamily starts surged by 17.1 percent in January to a 418,000 unit rate. Total residential building permits increased by 10.4 percent to a very strong 1,881,000 unit rate. Single-family permits gained 3.8 percent for the month, up to a 1,269,000 unit rate. Multifamily permits jumped by 27.2 percent in January to a very strong 612,000 unit annual rate. Residential construction activity remained hot through January, but a cold February will likely hamper construction activity. Also, high lumber prices and modest upward pressure on mortgage rates are eating into housing affordability. We look for ongoing strong new home sales in 2021, driving single-family construction, but we expect the rate of improvement to ease significantly after a blow-out 2020. Multifamily construction is broadening into lower density markets. The end to the evictions moratorium this spring may prove to be a watershed event for the multifamily market. It remains unclear what is going to happen with unprecedented arrears in rents.
Initial claims for unemployment insurance increased by 13,000 for the week ending February 13, to hit 861,000. The slight improving trend in initial claims through January appears to have stalled, leaving initial claims still highly elevated. Continuing claims fell by 64,000 for the week ending February 6, to hit 4,494,000. The total number of claims for all programs fell by 1.3 million for the week ending January 30, to hit 18.3 million. We expect to see only modest net job gains in February that will not be enough to make a dent in the unemployment problem.
Market Reaction: Stock indexes opened with losses. The yield on 10-year Treasury bonds increased to 1.29 percent. NYMEX crude oil is down to $61.05/barrel. Natural gas futures are down to $3.09/mmbtu.
