Single-family starts rose to their highest level since April 2022, pushing overall housing starts to a month-over-month leap of 10.7%, according to the latest data from the U.S. Census Bureau and the Department of Housing and Urban Development (HUD).
Cooling interest rates and the ongoing resale inventory shortage combined with unseasonably warm February temperatures to help total housing starts to a seasonally adjusted annual rate of 1.52 million units, bouncing back from a down January.
February’s pace was up 9.6% year over year. Construction activity for the month handily exceeded consensus expectations, with a Reuters poll of economists returned a forecast of 1.43 million units.
January’s figures, which were held down in large part by cold weather, were revised upwardly as well, from an initially reported 1.33 million units to 1.44 million.
Single-family building pushed February’s improvement, with starts in the subsector vaulting by 11.6% month over month. Much of that surge came from the Midwest, where milder weather patterns drove single-family starts up by a whopping 40.2% month over month.
“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 National Association of Home Builders (NAHB). The Housing Market Index (HMI) maintained joinly by the NAHB and Wells Fargo reached a reading of 51 in March, one point above breakeven and the index’s highest level since July last year.
The uptick in builder sentiment coincides with a pullback in discounts to coax buyers from the sidelines. The HMI survey revealed just 24% of builders reducing prices, the lowest percentage since last July.
“Single-family housing is poised for a good year in 2024 with starts and permits on an upward trend,” added Danushka Nanayakkara-Skillington, the NAHB’s assistant vice president for forecasting and analysis. “The uptick in single-family permits is good news for the industry, which was hit hard by tight monetary policy last year. However, builders still face several supply-side challenges in the form of shortages and higher prices for buildable lots and labor.”
Permitting data supports the rosy forecast for single-family housing. The construction report from the Census and HUD revealed that single-family housing authorizations grew to a seasonally adjusted annual pace of 1.03 million, the highest level in over a year and a half.
