The number of U.S. homes on which builders broke ground in January declined by the largest amount in nearly a year as bad winter weather played havoc with construction activity.
The Commerce Department reported Wednesday that the number of residential units on which construction began dropped to a seasonally adjusted annual rate of 1.9 million units, representing a sharp 7.9% drop from December’s pace of 2.07 million units. That had been the best pace since February 1984.
Although economists were predicting a slowdown in January from December’s lofty level, last month’s performance was weaker than the pace of around 2 million units that analysts were forecasting. Still, even with the decline, the pace of residential construction in January was still fairly brisk and was up 4.1% from the same month a year ago.
“Cold weather had an impact on the U.S. housing market last month, although underlying activity may finally be simmering down from red-hot levels,” said Sherry Cooper, chief economist at BMO Nesbitt Burns.
The housing market -- throughout the economic slump and the recovery -- has been the economy’s shining star, providing a source of support for business growth. Economists predict housing activity will be less of a contributor to growth this year but that the sector will stay healthy.
By region, housing construction in the Midwest plunged 21% in January from the month before to an annual rate of 319,000 units. In the Northeast, residential activity clocked in at a pace of 148,000 units, a 14% drop. Housing starts in the South declined 5.2% in January to a rate of 918,000 and in the West they dipped 1% to a pace of 518,000.