U.S. housing starts recorded their biggest drop in almost three years in January, likely weighed down by harsh weather, but the third month of declines in permits pointed to some underlying weakness in the housing market.
The Commerce Department said on Wednesday groundbreaking tumbled 16.0 percent to a seasonally adjusted annual rate of 880,000 units, the lowest level since September. The percentage drop was the largest since February 2011.
Starts for December were revised up to a 1.05 million-unit pace from the previously reported 999,000-unit rate.
Economists polled by Reuters had expected starts to fall to a 950,000-unit rate in January
Starts in the Midwest tumbled a record 67.7 percent, suggesting unseasonably cold weather could have disrupted activity. But at the same time groundbreaking in the Northeast surged to the highest since August 2008.
Frigid temperatures have been blamed for the sharp slowdown in hiring in December and January. They also chilled manufacturing output last month and have been cited for the unexpected drop in retail sales in January.
But not all of the weakness in data can be attributed to the cold weather, amid evidence the economy was already losing momentum towards the end of the fourth quarter.
Groundbreaking for single-family homes, the largest segment of the market, fell 15.9 percent to a 573,000-unit pace in January. That was the lowest level since August 2012. Starts for the volatile multi-family homes segment dropped 16.3 percent to a 307,000-unit rate.
Permits to build homes fell 5.4 percent in January, the largest drop in since June, to a 937,000-unit pace. Permits for single-family homes slipped 1.3 percent. Multifamily sector permits declined 12.1 percent.