U.S. single-family homebuilding fell sharply in January amid disruptions from snowstorms and freezing temperatures, with a rebound likely to be limited by higher costs from tariffs on imports and elevated mortgage rates.
Single-family housing starts, which account for the bulk of homebuilding, dropped 8.4% to a seasonally adjusted annual rate of 993,000 units last month, the Commerce Department's Census Bureau said on Wednesday. Data for December was revised higher to show homebuilding increasing to a rate of 1.084 million units from the previously reported pace of 1.050 million units.
Snowstorms and frigid temperatures slammed large parts of the country in January, conditions that also impacted retail sales and the labor market last month.
Though residential construction remains supported by a shortage of previously owned houses for sale, a protectionist trade policy being pursued by President Donald Trump's administration could make it challenging for builders to break ground on new housing projects.
Trump in his first weeks in office slapped an additional 10% tariff on imported goods from China. A 25% levy on imports from Mexico and Canada was suspended until March. Trump this month raised tariffs on steel and aluminum imports to 25% and has tasked his economics team with formulating plans for reciprocal tariffs on every country that taxes U.S. imports.
A survey on Tuesday showed the National Association of Home Builders/Wells Fargo Housing Market Index tumbled to a five-month low in February, a drop that was blamed on tariffs.
The survey noted that "with 32% of appliances and 30% of softwood lumber coming from international trade, uncertainty over the scale and scope of tariffs has builders further concerned about costs." More cost pressures are coming from high mortgage rates. The average rate on the popular 30-year fixed-rate mortgage is hovering just under 7%.
Higher mortgage rates and house prices have led to a glut of new homes, with inventory at levels last seen in late 2007. The supply overhang is another obstacle for builders.
Permits for future construction of single-family housing were unchanged at a rate of 996,000 units in January.