U.S. housing starts fell more sharply than expected in January to the lowest level since August in a sign the housing boom may finally be losing steam, a government report showed Wednesday.
Residential construction starts tumbled 7.9 percent last month to a seasonally adjusted 1.903 million annual rate from a downwardly revised 2.067 million rate in December, the Commerce Department said. December housing starts had been at the highest level since February 1984.
Analysts polled by Reuters were expecting starts to cool to a 2.0 million rate in January.
Despite the large decline, economists said starts were strong given the cold, snowy January in much of the country.
“It doesn’t look like a very bad report to me,” said Kurt Karl, chief U.S. economist for Swiss Re.
Single-family starts slid to a 1.537 million pace from a revised 1.670 million, also the lowest level since August.
Starts fell in all regions of the country.
Permits, an indicator of builder confidence, declined 2.8 percent to 1.899 million units from a 1.953 million rate in December. The drop was in line with analyst expectations.
Housing has surged in recent years as mortgage interest rates dipped to lows not seen since the early 1960s and remained close to that level. But home loan interest rates rose slightly last month as the U.S. economic recovery appeared to gain strength.
Economists expect 2004 housing activity to be slightly weaker than last year, but still post a very strong showing.
Rates on U.S. 30-year and 15-year fixed-rate mortgages have averaged between 5.64 percent and 5.72 percent during the last five weeks as traders gauged whether a recent pickup in economic growth would push the Federal Reserve to raise short-term interest rates for the first time since 2000.
Even so, Americans filed more mortgage requests last week on a new dip in mortgage rates, the Mortgage Bankers Association said earlier on Wednesday.
Federal Reserve Chairman Alan Greenspan testified last week the U.S. economy is poised for strong, lasting growth but said policy-makers can be patient about raising interest rates, though not indefinitely.
