US new-home construction fell in January, indicating the recovery in the housing market will be gradual as many buyers await a further decline in mortgage rates.
Residential starts decreased 14.8% last month to a 1.3 million annualized rate, the slowest pace since August, government data showed Friday. Multifamily home construction plummeted by more than 35% after surging in the prior month, while single-family groundbreakings also slowed.
The median estimate in a Bloomberg survey of economists called for a 1.46 million pace of total starts.
Building permits, a proxy for future construction, decreased to a 1.5 million rate. Permits for one-family homes edged higher after rising consistently throughout 2023, and multifamily authorizations fell 7.9%, the most since September.
The housing market’s recovery has struggled to maintain momentum as mortgage rates are still elevated near 7%. However, the nation’s builders have been gaining confidence in recent months on expectations that a further decline in borrowing costs will boost demand.
So far, builders have enjoyed limited competition from existing homes for sale. Homes available on the resale market are well below pre-pandemic levels as most owners remain reluctant to give up mortgages locked in at much cheaper rates.
