New home construction in the US plummeted to a 5-month low in January

• Housing starts fell 14.8% to a five-month low in January, Census Bureau data shows. 
• Single-family starts dropped 4.7% following a 6.4% drop in December, the sharpest consecutive decline since the summer of 2022.
• Economist David Rosenberg said it's hard to blame winter weather, as declines were seen across the US. 

Housing starts collapsed 14.8% month-over-month in January to a five-month low, according to Census Bureau data released Friday.

The annualized rate of 1.331 million units came as as a surprise compared to consensus estimates, and the sudden plummet was even more stark relative to a big upward revision to December's 1.562 million, up from an initial 1.46 million

Building permits also dropped 1.5% to 1.47 million, falling short of the forecast of 1.512 million. Private housing completions also disappointed, dropping 8.1% below the revised December estimate to 1.416 million. 

Building of single-family homes experienced a 4.7% decline following a 6.4% drop in December — marking the sharpest consecutive decline in that segment of the market since the summer of 2022. 

The decline in new construction flies against the trends of strong and rising demand throughout 2023 and into this year. It also marks a reversal from a period of rising supply seen recently, with new housing starts jumping 14.8% last November.  

But persistent inflationary pressure has dampened rate-cut hopes, keeping the rate on the 30-year mortgage elevated and weighing on the outlook for builders. The most popular US home loan jumped to 6.87% in the week ending February 9th, following a period of declines since mortgage rates topped 8% last October.

David Rosenberg, economist and president of Rosenberg Research, said in a note that it's hard to determine how much seasonal factors like inclement weather played a part in sending construction starts tumbling last month. 

"After all, weather should not influence building permits which only involves a click of a button," he said in a note on Friday, adding that the weather likely was not the culprit because the drop in housing starts was seen across regions, with a 20.6% fall in the Northeast, 30.0% in the Midwest, 9.7% in the South, and 15.7% in the West. 

Rosenberg added that a strong pipeline of multifamily construction will continue to impact the market for the foreseeable future. The silver lining here is that rising vacancies and lower property valuations in the sector will "act forcefully" to bring inflation down in the coming year, he said.