Home building jumped up to the highest pace in a decade in February after a
surge of building in the West region.
Single-family starts were estimated at an annual pace of
872,000, up 3 percent compared to the
rate a year earlier and the highest annual pace since September 2007, the U.S.
Census Bureau reported.
Overall, the annual pace of starts, including single-family and multifamily, increased to 1.29 million,
which is 6.2 percent higher than in February 2016.
Multifamily construction fell 7.7 percent over the January
level, but is up year over year by just over 11 percent.
The boost in single-family starts is welcome news in areas that have seen prices rise rapidly. On Wednesday, the Federal Reserve raised the short-term rate and is expected to raise it at least two more times this year, which is expected to push up longer-term rates and the cost of mortgages.
"Right now, rents and housing costs are
increasing faster than other components because of the stubborn housing
shortages in much of the U.S.," said Lawrence Yun, chief economist of the National Association of Realtors, on Wednesday. "To contain inflation and slow the pace of future
rate hikes, more home construction is needed now."
Starts are still running well below what is considered a normal level, however. According to an analysis by Trulia, starts are at just under 64 percent of the 50-year average. Trulia also noted that permitting activity also fell over the month, a sign that activity could slow down in the coming months.
February’s gains in starts came in the West, which saw overall housing
starts increase in the month by nearly 36 percent. Starts fell by 3.8 percent
in the South over the January level, 4.6 percent in the Midwest and 9.8 percent
in the Northeast.
Year over year, starts were up in all regions, except for the
Midwest, where they are down by 11.4 percent.
The gains were consistent with the surging levels of builder
confidence that hit a 12-year high across the country earlier this month, according
to the National Association of Home Builders (NAHB).
“We should see single-family production continue to grow
throughout the year, tempered somewhat by supply-side constraints, such as
access to lots and labor,” said NAHB Chairman Granger MacDonald, a
Kerrville, Texas-based builder.
NAHB Chief Economist Robert Dietz cautioned that the higher numbers could be
partly attributable to the warmer weather throughout the country, which was only
just interrupted in the Northeast this week by major snow storms. Dietz said
the drop in multifamily starts was expected.