The bottom just dropped out of the housing market. Or, at least, that’s what a report released this week by the government suggests.
According to the Commerce Department, the number of housing starts — new residential construction projects commenced during the month — plummeted by 16% in January compared to December.
It was the worst monthly decline in almost three years. The only recent month that even comes close was April of last year, when housing starts fell by 15%.
The general opinion is that unusually cold and snowy weather caused the dramatic decline, as many of the East Coast’s biggest cities have been bombarded by snowstorms since the beginning of the year.
According to the Associated Press, “U.S. home construction fell in January for a second month, but the weakness in both months reflected severe winter weather in many parts of the country.”
Yet, this appears to tell only half of the story, as housing starts in the hardest-hit region, the Northeast, actually increased by 62% compared to December. It was the Midwest that suffered the biggest blow, where new home construction fell by a staggering 68%.
“While we believe the weather did impact construction activity, we think this is just part of the story, as the new construction slowdown was more broad-based,” an economist at BNP Paribas wrote in a note to clients.