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The numbers: Construction of new U.S. homes rebounded 10.7% in February to an annual pace of 1.52 million units, the Commerce Department said Tuesday. That is the biggest gain in nine months. Despite the increase, starts are still below December’s level.
Economists on Wall Street were expecting a 7.4% rise in housing starts in February to 1.43 million. All numbers are seasonally adjusted.
The number of housing starts in January was revised slightly higher, to a drop of 12.3% to 1.37 million, from an initial reading of a 14.8% drop to 1.33 million. It is still the biggest drop since May 2022.
Building permits, a sign of future construction, rose 1.9% in February, also reaching a 1.52 million annual rate. That’s the highest level since August.
Economists expected a 1.4% increase to 1.49 million in February.
Building permits in January were revised to a fall of 0.3% to 1.49 million, from the initial estimate of a 1.5% drop to 1.4.7 million.
Key details: The construction pace of single-family homes rose by 11.6% in February, and apartment-building construction rose by 8.6%.
Home builders ramped up single-family home construction in the Midwest and South.
Permits for single-family homes rose 1% in February, while permits for buildings with at least five units or more rose 2.4%.
Big picture: Housing starts are notoriously volatile. Economists blamed severe winter weather for the big drop in January.
On Monday, the NAHB index of homebuilder sentiment moved into positive territory in March for the first time since July 2023. This should support single-family starts.
Looking ahead: “Over the next two years we’re forecasting very different paths for single and multi-family construction,” Thomas Ryan, economist at Capital Economics, said in a note to clients.
“We think single-family starts will benefit from the lack of second-hand homes on the market, which shifts demand to new builds. But that strength will be offset by weakness in the multi-family starts, leaving total housing starts not much higher,” he added.
Market reaction: Stocks were set to open lower on Tuesday. The 10-year Treasury note yield fell to 4.311% in early trading.
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