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Following December’s plunge, housing starts rebounded 18.6% in January, mostly the result of a surge in single-family starts, explained analysts at Wells Fargo. They point out “residential building should continue to improve as permits run ahead of starts”.

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“Housing starts came in above expectations and rebounded 18.6% in January, rising to a 1.23 million-unit pace. January’s strong gain follows a dismal December in which starts tumbled 14.0%. Data during the winter months are difficult to interpret given the low levels of activity relative to the spring and summer, which often exaggerate monthly readings after seasonal adjustment.”

“Building permits rose 1.4% to a 1.35 million-unit pace. Despite a softening trend, permits are running roughly 15.0% ahead of starts, which indicates starts are likely to rebound further headed into the spring.”

“Despite recent headwinds, the housing market appears poised for a modest rebound headed into the spring selling season. Amid softer sales and rising inventories, home prices continue to moderate, which should provide some relief for buyers challenged by affordability.”

“Since Fed officials struck a more dovish tone and indicated they would likely put further interest rate hikes on hold, mortgage rates have retreated by roughly half a percentage point. Furthermore, builder confidence and mortgage application data have firmed since the start of the year, an indication sales and new home construction are set to improve in coming months.”