Housing starts took a significant jump in February, surging 11.2% on an unadjusted basis compared with January to reach an annual rate 1.501 million, according to the U.S. Census Bureau.
Year-over-year, however, starts were down 2.9% compared with February 2024.
Starts of detached single-family homes were at a rate of 1.108 million, an increase of 11.4% compared with January.
Starts of multifamily properties (five units or more per building) were at a rate of 370,000, an increase of 12.1% compared with January.
Building permits were at a seasonally adjusted annual rate of 1.456 million, down 1.2% compared with January and down 6.8% compared with February 2024.
Permits for single-family homes were at a rate of 992,000, down 0.2% compared with January.
Authorizations for multifamily dwellings were at a rate of 404,000 in February, down 4.3% compared with the previous month.
Housing completions were at a seasonally adjusted annual rate of 1.592 million, down 4.0% compared with the January estimate and down 6.2% from February 2024.
“While solid demand and a lack of existing inventory provided a boost to single-family production in February, our latest builder survey shows that builders remain concerned about challenging housing affordability conditions, most notably elevated financing and construction costs as well as tariffs on key building materials,” says Buddy Hughes, chairman of the National Association of Home Builders (NAHB), in a statement.
“Despite elevated interest rates and policy uncertainty, ongoing lean levels of single-family existing home inventory helped to boost single-family production in February,” adds Jing Fu, senior director, forecasting and analysis for NAHB.
“NAHB forecasts that single-family starts will remain effectively flat in 2025 as prospects of a better regulatory business climate are offset by uncertainty on the tariff front,” Fu adds. “Meanwhile, multifamily construction is expected to remain soft in early 2025 due to challenging financing conditions, before stabilizing in the second half of the year.”
Odeta Kushi, deputy chief economist for First American, says while the strong increase in housing starts for February is a bit of a surprise, it needs to be viewed in context as there was a “steep decline in January.”
“Recall that the January decline was a function of several factors: a colder than usual January, mortgage rates crossing the 7 percent threshold in January, and ongoing builder pessimism reflecting lingering supply-side and affordability headwinds,” Kushi says in a statement.
“The higher rate of completions is immediate relief to a supply-constrained market,” Kushi says. “The regions that saw the largest month-over-month increases in single-family completions were the Northeast and the Midwest. The level of completions in the Northeast was the highest since April 2024, while the growth in the Midwest was a rebound from the big drop in January.”
“The smoothed single-family permits and starts data shows a modest positive trend, but there are headwinds that could hinder any positive momentum,” Kushi adds. “While builders have benefitted from a chronic housing shortage made worse by the ‘sellers’ strike’ fueled by higher mortgage rates, competition from existing-home inventory has picked up, especially in key builder markets like Florida and Texas.”
Kushi notes that builder sentiment dipped in March, hitting its lowest point since August.
“Builder confidence is weighed down by the double whammy of cost challenges and policy uncertainty,” she says. “Builders face persistent supply-side and affordability challenges, from higher material costs to a shortage of skilled labor. Material costs are still about 40 percent higher than pre-pandemic levels, making construction more expensive. Recent tariff actions could push costs even higher, with builders estimating an additional $9,200 per home. If tariffs persist, builders will have no choice but to pass on the costs to consumers, who are already struggling with housing affordability.”
“Optimism about single-family sales for the next six months remained flat and in the negative zone,” she adds. “Current sales conditions dropped from 46 to 43, marking the lowest level since December 2023. Prospective buyer traffic also took a hit, falling from 29 to 24.”
Photo: Avel Chuklanov
