Housing starts halted five consecutive months of decreases with a strong February, as a surge in multifamily construction spurred a 9.8% month-over-month jump.
That’s according to the U.S. Census Bureau and the Department of Housing and Urban Development (HUD), which jointly reported February’s seasonally adjusted annual rate of 1.45 million starts. Total construction got a major boost from multifamily building, which bounded to a 620,000-unit annualized pace, up 24% from January to hit its fastest gear since April last year.
The multifamily construction segment, which includes apartment buildings and condominiums, is notoriously volatile, with starts often seeing big shifts from month to month. But February’s swell in starts was accompanied by a similar bounce in multifamily permits, which vaulted 21.1% in February. The sizable permitting increase pushing the annualized pace to 747,000 units, close to the recent peak of 778,000 in December 2021.
Single-family starts also logged an increase, albeit a much smaller one, and the segment’s overall construction pace remains lackluster. February saw an uptick of 1.1% month over month to reach a rate of 830,000 single-family starts — a pace of production that the National Association of Home Builders (NAHB) described as “anemic.” But some signs of life are permeating the gloom, including budding confidence within the residential construction industry. The NAHB/Wells Fargo Housing Market Index, which tracks single-family market sentiment among builders, rose two points to a reading of 44 in March, the index’s third straight monthly increase.
“Despite persistent supply-side challenges, rising builder confidence is signaling a turning point for home building later in 2023,” said Robert Dietz, chief economist for the NAHB. “Starts were up in February given a limited pullback for interest rates. 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.”
Single-family permits also increased, aligning with Dietz’s diagnosis. Month over month, permits were up 7.6%, reaching a seasonally adjusted annual rate of 777,000 units. Multifamily permits grew 21.1%, climbing to an annualized 747,000-unit pace.