February Housing Starts Fell 7%

Housing starts fell 7% in February to a seasonally adjusted annual rate of 1.24 million, down from a revised January estimate of 1.33 million, according to figures from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.

What’s more, housing starts were down 4% compared with 1.29 million in February 2017.

The decrease comes after an increase of 9.7% in January.

Most of the decrease was due to a major drop in starts of multifamily homes (five units or more per building), which were at an annual rate of 317,000, down 28% compared with about 440,000 in January.

Starts of single-family homes in February were at a rate of 902,000, an increase of 2.9% compared with a revised rate of 877,000 in January.

Building permits were at a seasonally adjusted annual rate of 1.3 million, a decrease of 5.7% compared with a revised rate of 1.37 million in January but 6.5% above 1.21 million in February 2017.

Permits for single-family homes in February were at a rate of 872,000, a decrease of 0.6% compared with a revised figure of 877,000 for January. Permits for multifamily homes were at a rate of 385,000 in February, down 14.8% compared with 452,000 in January.

A lack of qualified labor has held home construction back in recent months. However, according to Mark Fleming, chief economist for First American, that’s about to change.

“The employment situation report, released earlier this month, reported an increase of nearly 7,000 residential construction jobs between January 2018 and February 2018,” Fleming says in a statement. “In fact, February was the best month for residential construction labor growth since August 2008. The number of residential construction jobs is now 3.8 percent higher than a year ago. The growth in residential construction jobs supports further improvement in the pace of home building because building a home does not readily lend itself to outsourcing and automation. It’s very hard to increase housing starts without increasing residential construction employment and productivity.”

Fleming says the recent increase in housing completions is a sign that more new homes are already being added to the housing stock.

“This signals some relief for the supply shortage,” he says. “The rise in permits, the leading indicator of housing starts, in conjunction with the dramatic rise in construction employment this month, signals an upward trajectory for housing starts for the spring home buying season. Residential construction employment is easing as a headwind to future housing starts.”

Robert Dietz, chief economist for the National Association of Home Builders (NAHB), says “some multifamily pullback is expected after an unusually strong January reading.”

“Multifamily starts should continue to level off throughout the year,” Dietz says. “Meanwhile, the growth in single-family production is in line with our 2018 forecast for gradual, modest strengthening in this sector of the housing market.”

Regionally in February, combined single-family and multifamily housing production increased 7.6% in the Midwest. However, starts fell 3.5% in the Northeast, 7.3% in the South and 12.9% in the West.

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