(IND) Housing in U.S. Cools as Weather Adds to Burdens: Economy

Housing starts in the U.S. slumped in January by the most in almost three years as unusually harsh winter weather added to the industry’s burdens.

Builders began work on 880,000 homes at an annualized rate last month, matching the lowest projection in a Bloomberg survey of economists and down 16 percent from December, according to data from the Commerce Department issued today in Washington. The decrease was the biggest since February 2011. Another report showed wholesale prices remained constrained.

The coldest January in two decades probably limited groundbreaking as construction in the Midwest dropped to a record low, indicating homebuilding will contribute less to economic growth at the start of 2014. The outlook for the rest of the year will hinge on whether hiring picks up enough to overcome declining affordability as mortgage rates and property values climb.

“We won’t know until probably April at the earliest whether there is some change in the fundamentals” of the market because of the weather impact, said Richard Moody, chief economist at Regions Financial Corp. in Birmingham, Alabama, whose projection of 894,000 starts was among the closest in the Bloomberg survey. If there is growth in job creation and incomes, “that will offset higher mortgage rates,” he said.

The continued bad weather this month means “we won’t know until probably April at the earliest whether there is some change in the fundamentals,” Moody said.

Source: Bloomberg.com