By Vicki Needham - 02/19/14 01:26 PM EST
New housing construction plunged amid a spate of relentless winter storms in January.
Construction dropped 16 percent to a seasonally adjusted annual rate of 880,000 last month from December, the Commerce Department said Wednesday.
"Cold weather clearly put a chill on new home construction last month and this is also reflected in our latest builder confidence survey," said Kevin Kelly, chairman of the National Association of Home Builders (NAHB) and a homebuilder and developer from Wilmington, Del.
Confidence in the housing market fell to 46 in February, down 10 points from January, according to the NAHB’s index released on Tuesday.
Readings at or above 50 reflect optimism about the housing market.
"Further, builders continue to face other obstacles, including rising materials prices and a lack of buildable lots and labor," Kelly said.
Still, despite a couple of rough months, economists are expecting the housing market to pick up pace this year.
"Though the decline in starts is largely weather related, it is worth noting that on the upside housing production for the fourth quarter was above 1 million for the first time since 2008 while single-family permits held relatively steady," said David Crowe, the NAHB's chief economist.
"The less weather sensitive permits data suggests that our forecast for solid growth in single-family housing production in 2014 remains on track, as pent-up housing demand is unleashed."
Construction had tailed off in December by 4.8 percent, mostly due to severe winter weather.
Overall, applications for building permits fell in January for a third month, dropping 5.4 percent to a rate of 937,000.
In January, single-family housing starts posted a 15.9 percent decline to 573,000 units, while multi-family production fell 16.3 percent to 307,000.
Regionally, construction soared 61.9 percent in the Northeast but fell in all three other regions.
Construction fell 67.7 percent in the Midwest, where snow dominated the weather last month.
Construction dropped 12.5 percent in the South and 17.4 percent in the West.
By region, single-family starts activity rose 10.7 percent in the West and 2 percent in the Northeast and fell 13.8 percent in the South and 60.3 percent in the Midwest.
Permits were up in two of four regions — 8.6 percent in the Midwest and 3.4 percent in the South — and fell 10.3 percent in the Northeast and 26 percent in the West.