and Rodrigo Campos
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.
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.
The data comes a day after the National Association of Home Builders reported that U.S. homebuilder confidence suffered its largest one-month drop ever in February.
Wednesday's survey covers more than 75 percent of U.S. retail residential mortgage applications, according to MBA.