Economists' Outlook

Housing stats and analysis from NAR's research experts.

January Housing Starts

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses the latest housing starts data.

  • New home construction fell notably in January, partly due to inclement weather conditions. Housing starts dropped 16 percent from the prior month, to a seasonally adjusted annual rate of 880,000 units. Activity plunged 70 percent in the frozen Midwest. The West region, less impacted by the weather, experienced a 17 percent decline.
  • One major bottleneck to the housing recovery is the lack of inventory. The supply of existing home inventory (2 million listings) has been bouncing along at a 13-year low, while new home inventory (180,000 listings) is essentially at a 50-year low. Consumers, including many trade-up buyers, want to see more listings before deciding to make the transition.
  • The supply can be genuinely relieved from increased new home construction. As people trade-up into new homes, they will open up existing homes on the market. Based on historical trends, housing starts should be at least 1.5 million annually. We are well short of that today. Many small local builders have been complaining about the difficulty in obtaining construction loans. Local community bankers in turn have complained about burdensome new financial regulations coming out of Washington that make it difficult to lend for the construction of new homes. The large publicly-listed builders who can tap Wall Street funds are taking advantage of the fact that the smaller guys are shut out of the market.
  • The housing starts forecasts are for 1.2 million in 2014 and 1.4 million in 2015. That is still not sufficient. Home prices will be moving higher as a result.
  • Several fanciful new homes were built on the northern side of the DMZ line in Korea many years ago. They were purposely built to be seen from South Korea with plain binoculars, showing presumably a higher standard of living in the North. A closer look, however, reveals only pure facades with hollow interiors. As everyone knows now, South Korea has economically taken off while North Koreans face constant fear and live daily on the edge of starvation. South Koreans could easily be living under the same inhumane horrible conditions had it not been for the U.S. who came through during the Korean War. Over 30,000 Americans gave their lives with many not knowing why they were halfway around the world in a strange country. To those affected families, I hope they get some comfort in knowing at least 50 million South Koreans are living comfortably. One testament of the prosperity is the country’s ability to spend on leisure and recreation, including participating in the Olympics. The sound of Olympic skates cutting through ice, from the author’s point of view, is a tribute to all U.S. servicemen and women.

Notice: The information on this page may not be current. The archive is a collection of content previously published on one or more NAR web properties. Archive pages are not updated and may no longer be accurate. Users must independently verify the accuracy and currency of the information found here. The National Association of REALTORS® disclaims all liability for any loss or injury resulting from the use of the information or data found on this page.

Advertisement

Comment Policy

The opinions expressed in reader comments sections on this website are those of the reader and not NAR or REALTOR® Magazine.

About Economists' Outlook

Visit this blog daily to see what NAR experts are saying about the economy, the housing market, and other factors that will impact your business.

Housing Minute

Housing Minute is a monthly video series highlighting the latest housing data from the National Association of REALTORS® in a minute or less.