Severe snowstorms and low temperatures have significantly impacted the construction of single-family homes in the United States in January, with the rebound potential limited by rising costs due to import tariffs and increasing mortgage rates.
According to the U.S. Census Bureau, single-family housing starts, which account for the majority of housing construction, dropped by 8.4% last month, with a seasonally adjusted annual rate of 993,000 units reported on Wednesday, February 19th. Data from December was revised to show an increase in housing construction from the previously reported 1.05 million units to 1.084 million units.
The snowstorms and cold temperatures that hit most parts of the United States in January also affected residential retail sales and the labor market last month.
While residential construction continues to be supported by a shortage of existing homes for sale, the tariff policies implemented by President Trump’s administration may pose challenges for builders when breaking ground on new housing projects.
In the initial weeks after taking office, Trump imposed an additional 10% tariff on imports from China and temporarily delayed the 25% tariffs on goods imported from Mexico and Canada until March. This month, Trump raised the tariffs on steel and aluminum imports to 25%, and his economic team has been tasked with developing plans to impose reciprocal tariffs on imports from countries that levy duties on American goods.
A survey conducted on Tuesday showed that the National Association of Home Builders/Wells Fargo Housing Market Index fell to its lowest level in five months in February, a decline attributed to tariffs.
The survey indicated, “32% of appliances and 30% of softwood lumber are from international trade, and the uncertainty of the scale and scope of tariffs further concerns builders about costs.” Additional cost pressures come from high mortgage rates, with popular 30-year fixed-rate mortgages averaging below 7%.
Higher mortgage rates and housing prices have resulted in an oversupply of new homes, with inventory levels reaching those of the end of 2007. The oversupply poses another obstacle for builders.
The number of permits for future construction of single-family homes in January stands at 996,000 units, remaining flat compared to the same period last year.
(This article was referenced from reports by Reuters)