US housing construction surged higher in February and reversed after five straight months of decline.
Housing starts, a measure of new housing construction, rose 9.8% in February from January. But that’s still down 18.4% from a year ago, according to data released Thursday by the Census Bureau. January launches rose to a seasonally adjusted annualized rate of 1.450 million from the revised January estimate of 1.321 million.
Housing starts fell sharply in May and July last year as rising mortgage rates marginalized many potential homebuyers. Launches recovered slightly in August but have been declining since then.
February housing starts for single-family homes rose 1.1% from the revised January figure, at a seasonally adjusted annual rate of 830k.
As mortgage rates trended lower from November through January, homebuilders are starting to be more optimistic that conditions could improve in 2023. However, recent strong economic data and uncertainty in the banking sector mean inflation concerns remain, along with volatile mortgage rates.
Building permits, which track the number of new housing units approved, rose for the second straight month in February, rising 13.8% from the revised January rate and falling 17.9% from a year earlier. In February, seasonally adjusted annualized building permits were 1.524 million.
“As the spring home selling season began, homebuilders were showing signs of optimism in anticipation of higher buyer demand,” said Kelly Mangold of RCLCO Real Estate Consulting. “However, interest rates and development costs remain high while prices fall – affecting potential upside potential in home sales.”
And mortgage rates remain volatile for buyers. Yields rose half a percentage point in February but are now cooling as uncertainty in the banking industry has pushed investors into the relative safety of bonds.
The historically low inventory of existing homes — many owned by homeowners reluctant to sell and parting with an extremely low mortgage rate — is driving many buyers toward new-build housing.
“The number of existing homes on the market has hit an all-time low, giving new homes less competition — and they’re often one of the only options for motivated buyers,” Mangold said.
According to a recent analysis of the housing market, about 6.5 million homes were missing in the United States between 2012 and 2022. New construction of all kinds is crucial to closing this gap.
“We are currently in a period of economic uncertainty and it is possible that we will see improvements throughout the year or that launches will continue to decline if we enter a true recession,” Mangold said.
Source : www.cnn.com