U.S. Housing Starts Slump In January

By Agence France-Presse Groundbreaking on new U.S. homes plunged in January as a near-Arctic freeze gripped parts of the country, the government said Feb. 18. Housing starts, which had hit a 20-year record in December, dropped 7.9% in the month to January to a seasonally adjusted annual rate of 1.90 million homes, a five-month low, the Commerce Department said. The dive was much steeper than expected by economists. "There was a sharp decline in housing starts in January, but let's not panic just yet," said Joel Naroff, president of Naroff Economic Advisors. "Cold and snowy weather can take its toll on construction and that may have been the case in January." New housing projects were still running 4.1% above the year-earlier rate, data showed. Activity dropped fastest in areas where the weather was worst, with house building plummeting 18.5% in the Northeast and 13.5% in the Midwest. "That weather played a role can be seen in the permit data, which was down much less," Naroff said. The number of building permits -- a barometer of future activity -- fell 2.8% from the previous month to an annual pace of 1.90 million. Permits were up 6.9% from last year, however. "There is every expectation that home construction will cool this year," however, Naroff said. "Rates will likely rise, and we have satisfied an awful lot of pent-up demand for homes over the past few years. But even a 10% drop from the 2003 record will only take us back close to the very strong 2002 levels," he said. The government revised the number of new housing projects in December to an annual rate of 2.07 million -- still the highest since 1984 -- from the first estimate of 2.09 million. Copyright Agence France-Presse, 2004