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Housing Starts Up 9.8% but Single-Family Lags

Multifamily starts surged 24% in Feb., suggesting future relief for renters and condo buyers, but single-family starts rose only a marginal 1.1%.

WASHINGTON – Hopes for a surge in new single-family homes failed to appear in February, according to the U.S. Department of Housing and Urban Development and the U.S. Census Bureau – but overall housing starts rose 9.8% (1.45 million units per year if the February pace continued for a full year).

Builders still cite elevated mortgage rates, high construction costs and tightening credit conditions as a threat, along with a new problem: recent turmoil in the banking system. It’s still unclear if the banking issues will quickly fade away or continue to have an impact.

Within those 1.45 million units, single-family starts increased 1.1% to an 830,000 seasonally adjusted annual rate. However, that increase is still 31.6% lower year-to-year.

The multifamily sector, which includes apartment buildings and condos, increased 24% to an annualized 620,000 pace.

“Builders continue to grapple with increased market uncertainty due to ongoing building material supply bottlenecks, volatile mortgage rates and increased jitters in the banking sector,” said Alicia Huey, chairman of the National Association of Home Builders (NAHB). “At the same time, builder sentiment has been edging higher in the early part of 2023 as a significant amount of housing demand exists on the sidelines and resale inventory is limited.”

“Despite persistent supply-side challenges, rising builder confidence is signaling a turning point for home building later in 2023,” adds NAHB Chief Economist Robert Dietz. “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.”

On a regional basis month-to-month single-family and multifamily starts were 16.5% lower in the Northeast, 70.3% higher in the Midwest, 2.2% higher in the South and 16.8% higher in the West.

Overall permits increased 13.8% to a 1.52 million unit annualized rate in February. Single-family permits increased 7.6% to a 777,000 unit rate. Multifamily permits increased 21.1% to an annualized 747,000 pace.

Looking at regional permit data compared to the previous month, permits were 2.8% lower in the Northeast, 9.6% higher in the Midwest, 10.9% higher in the South and 30.0% higher in the West.

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