Housing starts rebound in February

Starts for buildings with five units or more jumped ahead 24.1% for the month.
Single-family permits increased 7.6% for the month.

The residential construction industry made a strong showing in February as housing starts and permits jumped ahead, according to the latest Monthly New Residential Construction Report.

Privately‐owned housing starts in February were at a seasonally adjusted annual rate of 1.450 million, rising 9.8% above the revised January estimate of 1.321 million, the U.S. Census Bureau and the U.S. Department of Housing and Urban Development jointly reported this morning.

Housing starts still remain 18.4% below the February 2022 rate of 1.777 million, however,

Single-family starts rose 1.1% to a rate of 830,000 from the revised figure of 821,000 in the prior month. 

Multifamily starts had strong gains in February. The February rate for buildings with five units or more was 608,000, jumping 24.1% above the revised January rate of 490,000.

Total housing permits for the month increased 13.8% to a seasonally adjusted annual rate of 1.524 million compared to the revised January rate of 1.339 million. Permits are still 17.9% below the February 2022 level of 1.857 million.

Single‐family permits in February moved upward by 7.6% to a rate of 777,000 from the revised January rate of 722,000.

Permits for buildings with five units or more were at a rate of 700,000 in February. 

Authorizations of units in buildings with five units or more were at a rate of 700,000 in February. This is a 24.3% increase from the January rate of 563,000 and a 16.9% increase compared to a rate of 599,000 in February 2022.

“Builders continue to grapple with increased market uncertainty due to ongoing building material supply bottlenecks, volatile mortgage rates and increased jitters in the banking sector,” said Alicia Huey, chairman of the National Association of Home Builders (NAHB) and a custom home builder and developer from Birmingham, Ala. “At the same time, builder sentiment has been edging higher in the early part of 2023 as a significant amount of housing demand exists on the sidelines and resale inventory is limited.”

Today's news follows the latest NAHB/Wells Fargo Housing Market Index released on March 15. The HMI saw builder confidence rise by 2 points after increasing in the prior month. Last year, the HMI declined for 12 straight months.

“Despite persistent supply-side challenges, rising builder confidence is signaling a turning point for home building later in 2023,” said NAHB Chief Economist Robert Dietz. “Starts were up in February given a limited pullback for interest rates. We expect volatility in the months ahead as ongoing challenges related to construction material costs and availability continue to act as headwinds on the housing sector. However, interest rates are expected to stabilize and move lower in the coming months, and this should lead to a sustained rebound for single-family starts in the latter part of 2023.”

Click to enlarge the latest New Residential Construction chart from the U.S. Census Bureau and the Department of Housing and Urban Development.

Here's how residential construction in February performed on a regional basis:

  • In the Northeast, total starts declined 16.5% while single-family starts increased 8.6%. Combined permits fell 2.8% as single-family permits dropped 14.5%.
  • In the Midwest, total starts soared ahead by 70.3% as single-family starts decreased 8.1%. Combined permits increased 9.6% as single-family permits rose 10.9%.
  • In the South, total starts were up 2.2% as single-family starts fell 4.7%. Combined permits in the region were up 10.9% as single-family permits saw a 9.8% increase.
  • In the West, total starts saw a 16.8% increase as single-family starts performed strongly and moved up by 28.5%. Combined permits shot up 30% as single-famliy permits saw growth of 7.6%.

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