Housing starts saw a sharp falloff in February amid the specter of high lumber prices and supply shortages.
Privately-owned housing starts in February fell 10.3% to a seasonally adjusted annual rate of 1.421 million from the revised January estimate of 1.584 million, the U.S. Census Bureau and the U.S. Department of Housing and Urban Development reported today.
The latest report is also 9.3% below the February 2020 rate of 1.567 million.
Single-family housing starts in February dropped 8.5% from the revised January rate of 1.136 million. The multifamily sector, including apartment buildings and condos, decreased 15% to a 381,000 pace.
Residential building permits declined 10.8% to 1.682 million from the January rate of 1.886 million. But the February rate is also 17% above the February 2020 rate of 1.438 million.
Single-family permits decreased 10% to 1.143 million compared to the revised January rate of 1.270 million. Multifamily permits decreased 12.5% to a 539,000 pace.
“Despite strength in buyer traffic and lack of existing inventory, builders are slowing some production of single-family homes as lumber and other material costs, along with interest rates, continue to rise,” said Chuck Fowke, chairman of the National Association of Home Builders (NAHB). “Shortages of lumber and other building materials, including appliances, are putting future construction expansion at risk.”
Yesterday, the NAHB reported that builder sentiment has taken a step back in March. The latest NAHB/Wells Fargo Housing Market Index (HMI) shows that builder confidence in the market for newly built single-family homes fell two points to 82 in March, primarily due to high lumber prices and rising material costs.
“While single-family starts for the first two months of the year are 6.4% higher than the first two months of 2020, there has been a 36% gain over the last 12 month of single-family homes permitted but not started as some projects have paused due to cost and availability of materials,” said NAHB Chief Economist Robert Dietz. “Single-family home building is forecasted to expand in 2021, but at a slower rate as housing affordability is challenged by higher mortgage rates and rising construction costs."
Dietz also noted that the February winter storm Uri held down home building in Texas and neighboring states.
Here’s how housing starts and permits performed by region:
- In the Northeast, total housing starts dropped 39.5% as single-family starts fell 3.9%. Permits decreased 9.8% while single-family permits broke even.
- In the Midwest, total starts decreased 34.9% as single-family starts dove 30.5%. Total permits increased 1.2% but single-family permits are down 2.8%.
- In the South, total starts decreased 9.7% and single-family starts diminished by 16%. Total permits are down 13.9% with single-family permits falling 14.9%.
- In the West, total starts jumped 17.6% as single-family starts soared 22.9%. Total permits in the West declined 11.3% while single-family starts fell by 5.1%.
The complete Monthly New Residential Construction report for February 2021 is available here.