Housing construction activity slowdown continues: BuildFax

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Continued declines in new- and existing-home construction activity during January showed the housing slowdown was not easing and indicated possible broader economic problems to come, a BuildFax report said.

It was the third consecutive month of year-over-year declines, although there was a slight month-to-month rise in single-family housing authorizations.

Single-family housing authorizations decreased by 3.48% year-over-year in January, although they rose by 1.23% compared with December.

The trailing three-month outlook, starting in November 2018, had a 3.04% decrease from the previous year, which was notable because continued year-over-year declines in single-family housing authorizations historically correlate with economic recessions between 1961 and 2018, the BuildFax report said.

"Declining construction activity during the last few months of 2018 has persisted into the new year," said BuildFax COO Jonathan Kanarek in a press release. "Given current economic conditions, including the recent government shutdown, sensitivity to interest rate increases and global market stressors, like ongoing trade negotiations, we were not surprised to see persistent declines in housing activity. It is yet to be seen if an easing of these external factors will alleviate the housing slowdown."

Existing housing maintenance volume decreased by 6.47% compared with January 2018, while the dollars spent on maintenance fell 7.29%.

The housing remodel volume, a subset of the maintenance category which included housing renovations, additions and alterations, decreased by 10.85% year-over-year. However, remodeling spending increased 1.26% compared to January 2018.

"Demolition activity can be a leading indicator of economic reinvestment in a community, which often precedes larger real estate projects," said Kanarek. Over the past five years, demolitions increased 16.65% nationwide.

"However, historical BuildFax research suggests intended projects are cut short when timing aligns with an economic slowdown," he continued. "During the last housing crisis, abandoned construction projects replaced anticipated new housing construction. This is not necessarily indicative of trends in a future economic slowdown, but definitely a cycle we're tracking closely."

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