Housing Starts Are Down, But Don’t Panic

House ConstructionSo says Ezra Klein over at Wonk Blog. Housing starts dropped 8.5% in January, but there are reasons for optimism, or at least neutralism. Wonk Blog reports:

First, housing starts numbers are often volatile in the winter months. A major blizzard over a large part of the country can easily stop home construction in its tracks, and conversely an unusually mild winter can mean a boom in housing construction that normally would have waited until spring instead beginning in January or February. So it can be helpful to look at averages over two or three months rather than any single month. And by that measure, things look better. December’s housing starts number included an unusually big rise–a revised 15.7 percent bump, even stronger than the 12.1 percent gain first reported. Average December and January, and builders started on new home construction at a 931,500 annual rate, which easily surpasses the 865,000 monthly average of October-November.

And, Ezra says:

But the bigger reason to put more faith in January’s decent permits numbers than in the steep drop in starts comes down to sampling. The Census gets reports from local governments each month about how many permits they have issued for new construction that tend to be quite accurate. That’s why the Census says with 90 percent confidence that the housing permits number, 1.8 percent, truly lies somewhere within 0.9 percent of that growth rate. It is almost certain, in other words that the number of permits issued was up a little bit in January.

So put away the umbrella (for now).