- Housing starts rose 11.2% in February to an annualized 1.5M units, surpassing expectations.
- Single-family starts jumped 11.4% to 1.11M units, the fastest pace in a year.
- Building permits, a key indicator of future construction, fell 1.2% to 1.46M units.
- Builders continue to offer incentives, including mortgage rate buydowns, to attract buyers.
- Tariff uncertainty on building materials, including lumber, is weighing down builder sentiment.
US housing starts rebounded in February after a weather-related dip in January, with single-family home construction leading the recovery.
By The Numbers
Residential construction increased 11.2% to an annualized pace of 1.5M units, exceeding all forecasts in a Bloomberg survey of economists.
The gains were fueled by an 11.4% rise in single-family starts to 1.11M units, the fastest pace in a year, while multifamily starts climbed 10.7%.
The rebound in homebuilding activity after severe winter storms slowed construction in January. Regions hurt by harsh weather, particularly the South and Northeast, saw the strongest recovery, while the West reported moderate gains and the Midwest recorded a decline.
Builder Incentives
Despite the pickup in construction, builders are facing headwinds, including high mortgage rates and a surplus of unsold homes. Many homebuilders are offering mortgage rate buydowns and price adjustments to attract buyers.
Additionally, the supply of newly built homes is at its highest level since 2007, creating pricing pressure. The National Association of Home Builders sentiment index fell this month to its lowest point since August, revealing concerns over future demand and construction costs.
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Permits Down
While February’s housing starts showed a strong rebound, building permits—a forward-looking indicator of construction—dropped 1.2% to 1.46M units.
Single-family permits edged down 0.2%, suggesting caution among builders due to economic uncertainty.
Looming tariffs on building materials, including lumber, are hindering efforts. Notably, rising costs have the potential to slow down construction activity even more in the coming months, despite the recent rebound.
Looking Ahead
While February’s gains suggest resilience in the housing market, economists remain cautious about sustained growth. Mortgage rates above 6% continue to weigh on affordability, and elevated inventory levels could dampen demand.
The next key indicator for the housing market will come from existing home sales data, set to be released later this week, and which should offer some insights into overall housing conditions.
