Housing starts in February came in above consensus expectations, jumping 9.8% compared with January to a seasonally adjusted annual rate of 1.45 million, but remained down 18.4% compared with February 2022.
Starts of single-family homes were at an annual rate of 830,000, up 1.1% compared with January. Starts of multifamily properties (five units or more per building) were at a rate of 608,000, up 24.1% compared with the previous month.
Building permits also increased month over month, rising 13.8% compared with January to a seasonally adjusted annual rate of 1.524 million, according to the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.
However, year over year, permits were down 17.9% compared with February 2022.
Permits for single-family homes were at an annual rate of 777,000, up 7.6% compared with January. Permits for multifamily dwellings were at a rate of 700,000, an increase of 24.3% compared with the previous month.
Housing completions were at a seasonally adjusted annual rate of 1.557 million, an increase of 12.2% compared with the previous month and up 12.8% from a year ago.
Odeta Kushi, deputy chief economist for First American, says the uptick in single-family housing permits and starts “aligns with the recent increase in homebuilder sentiment.”
“Sentiment increased for the third consecutive month in March, with two of the three components of the index – current single-family home sales and prospective buyer traffic – rising,” Kushi says. “Conditions are still considered ‘poor’ overall, but the improvement signals cautious optimism.
“One of the drivers behind higher builder sentiment is the lack of existing-home inventory available for sale,” she adds. “The shortage of existing-home inventory means more and more buyers could turn to the new-home market.”
“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,” says Alicia Huey, chairman of the National Association of Home Builders (NAHB), in a statement. “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.”
Robert Dietz, chief economist for NAHB, says he expects to see home building increase later this year, despite persistent supply-side challenges.
“Starts were up in February given a limited pullback for interest rates,” Dietz says. “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.”