Well, that’s encouraging. After dropping 4.1% in January, housing starts were back up in February, rising 6.8% month over month to a seasonally adjusted annual rate of 1.769 million according to a report released Thursday by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
This is 22.3% above the rate recorded a year ago.
“The number of single-family homes under construction increased to the highest level since 2006,” First American deputy chief economist Odeta Kushi said in a statement. “While builders are continuing to push to meet demand, supply-side headwinds slow the home-building momentum at a time when the housing market desperately needs more supply relief.”
Construction of single-family homes rose 5.7% from January to 1.215 million units. The multifamily sector, which includes apartment buildings and condos, also saw an increase, rising 9.3% to an annualized pace of 554,000. This is the best rate of apartment construction since January 2020.
“Builders continue to start homes as the demand for new construction remains solid in a market lacking inventory of previously owned homes,” Jerry Konter, chairman of the National Association of Home Builders (NAHB), said in a statement. “However, construction costs are rising too quickly, which threatens housing affordability conditions in 2022 as interest rates rise.”
The number of building permits issued in February came in at a seasonally adjusted rate of 1.859 million, a 1.9% drop from the month prior, but still 7.7% above the February 2021 rate.
“On the single-family front, the count of homes permitted but not started construction reached a four-month high in February, rising to 152,000,” NAHB chief economist Robert Dietz said in a statement. “This is an indication of the ongoing supply-chain delays and cost issues that are limiting the pace of home building in many markets.”
Housing completions came in at a seasonally adjusted rate of 1.309 million, a 5.9% month-over-month increase. However, it remains 2.8% below the February 2021 rate.
Despite these promising numbers, in March, homebuilder sentiment in the market for newly built single-family homes dropped below the 80-point mark for the first time since September 2021 according to the National Association of Home Builders (NAHB) and Wells Fargo Housing Market Index (HMI) report. Experts say that continued supply chain issues, labor shortages, rising material costs and rising interest rates are to blame.
“As mortgage rates rise, all else held equal, house-buying power falls,” Kushi said in a statement. “Homebuilder confidence fell in March as builders continue to face supply chain disruptions, price increases, and concerns that declining affordability will price out buyers.”
Regionally, housing starts saw month-over-month increases of 28.7% in the Northeast, 15.3% in the Midwest, 11.4% in the South and a 11.4% decrease in the West.
Nationwide there are currently 799,000 single-family homes under construction, up 28.3% compared to a year ago.