The Construction Industry is Feeling the Chill of This Year’s Winter Storms

Charles EadieA drop in housing construction in the U.S. occurred in January, bringing housing construction down 16 percent overall.  This is surprising because the housing construction industry had been doing fairly well in the recovering economy.  In 2013, housing construction rose 17.7 percent with an annual build rate of 976,000, the highest number since 2007.  However, in January, workers started at a seasonally adjusted annual rate of 880,000 after a 5.4 percent drop in December 2013.  Analysts are blaming the severe winter weather that has occurred in many parts of the country for the drop in construction.

In the U.S. January, single-family building dropped 15.9 percent.  Apartment construction dropped as well, decreasing 16.3 percent.  Regionally, the Northeast was able to bounce back after the two month drop, but declines were seen in every other region of the country.  Construction was down 12.5 percent in the South, 17.4 percent in the West and 67.7 percent in the Midwest, leaving the region with a record breaking low of 50,000 units constructed at an annual rate.  Analysts, again, attribute this to the sever winter weather the region has experienced so far this year.

Despite the recent decline, there is an expectation that housing construction will continue to rise as it did before the losses in December and January.  Continuing job growth, gains in employment and low mortgage rates will presumably help the industry.

However, there was a steep decline in the confidence of U.S. homebuilders in February because of the lack of construction.  Additionally, the cold weather seems to have made many builders pessimistic about the housing market before it hits its natural spring home-selling season.  This view could slow the rate of rebound in the industry.

Overall, the index for the housing market has been above 50 since June, reflecting a rebounding housing market that will not be undone by winter weather.  It may, however, be a little deterred.

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