US housing market: Single-family starts heat up in February

U.S. housing starts in February posted a double-digit percentage increase month-over-month as construction picked up following a weather-related lull in January.

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The Census Bureau reported total U.S. starts at a seasonally adjusted annual rate (SAAR) of 1.521 million units, that total was 10.7% above the revised January reading. An 11.6% surge in single-family starts to 1.129 million units drove the gain. The single-family tally was the highest in almost two years.

Analysts cited moderately lower mortgage rates and generally better weather for the February gains. Mortgage rates as reported by Freddie Mac have held under 7.0% in 2024 after peaking at 7.79% in October 2023. Home builders have gained an advantage over existing sales in that many have offered rate buydowns and other incentives to new buyers.

“National builders are still having success with the rate buydowns,” said Jennifer Coskren, senior economist at Fastmarkets. “With the labor market still solid and existing inventory, while unfreezing a bit, still exceedingly tight, new construction is probably the best option in town.”

On a regional basis, starts in the Midwest were the strongest month-over-month, surging 50.7% in February amid favorable building conditions. The South, by far the largest market for new-home construction, jumped 15.7% to 883,000 units. Total starts gained on a year-over-year basis in every region except the West, which was off 10.8% from the year-ago level.

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) gained three points this month to a favorable reading of 51. The index portends continued resilience for single-family construction, according to the NAHB.

“The solid level of single-family production in February tracks closely with rising builder sentiment, and with mortgage rates expected to moderate further this year, this will provide an added boost for single-family building,” said Carl Harris, chairman of the NAHB.

Housing permits also ticked up in February, climbing to 1.518 million units (SAAR). February permits registered a 2.4% increase on the year-ago level.

Housing units under construction remained near record-high levels at 1.666 million units (SAAR). However, modest declines of 0.5% month-over-month and 1.2% year-over-year dragged the February reading to its lowest level since March 2022. 

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