WASHINGTON -- 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.
That weakness was evident in another report released Wednesday that showed a drop in applications for new mortgages.
The Commerce Department said Wednesday groundbreaking for new homes tumbled 16 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. %VIRTUAL-article-sponsoredlinks%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.
Separately, industry group said applications for U.S. home mortgages fell in the latest week, with both purchase and refinancing applications down.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 4.1 percent to 380.9 in the week ended Feb. 14.
The interest rate on fixed 30-year mortgages averaged 4.50 percent last week, up 5 basis points from the previous week.
The MBA's seasonally adjusted index of refinancing applications fell 2.7 percent. The gauge of loan requests for home purchases, a leading indicator of home sales, fell 6.3 percent to hit its lowest level since September 2011.
Wednesday's survey covers more than 75 percent of U.S. retail residential mortgage applications, according to MBA.
9 Numbers That'll Tell You How the Economy's Really Doing
Housing Starts, Permits Tumble; Mortgage Applications Fall
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.