U.S. new-home construction cooled by more than expected in February on a reversal in the volatile multifamily category, while building remained on pace to contribute to economic growth this quarter, government figures showed Friday.
Residential starts fell 7% to a 1.24 million annualized rate (estimates 1.29 million) after a 1.33 million pace in prior month. Single-family home starts rose 2.9%, their second straight gain while multifamily starts fell 26.1% after similar jump the prior month. Permits, a proxy for future construction of all types of homes, fell 5.7% to 1.3 million rate (estimates 1.32 million) from 1.38 million pace the prior month.
Even with February’s decline, the results indicate homebuilding is continuing the progress made last year, with demand supported by a tight job market and steady pay gains. Mortgage rates remain historically low despite recent increases and consumer confidence is elevated as tax cuts aid disposable income.
The report indicated a tight supply of homes is getting an influx: The number of housing units completed rose to a 1.32 million annualized rate, the highest in 10 years. That may bode well for buyers, as the lack of inventory in recent years has helped reduce affordability.
A gauge of homebuilders’ confidence eased to a four-month low but remained near its highest point in nearly two decades, according to a report on Thursday. Further gains in homebuilding depend on whether certain market factors persist, including a shortage of workers, rising material costs, and what developers say is a lack of buildable lots.
Single-family home starts rose to a 902,000 rate, the highest in three months, from 877,000. Groundbreaking on multi-family homes, such as apartment buildings and condominiums, fell to an annual rate of 334,000; data on these projects can be volatile. Three of four regions posted a decline in starts, led by West and South; Midwest saw an increase.
