Residential starts made a comeback last month after severe winter weather slowed builders down.
Residential home construction increased by 10.7% in February to a 1.52 million annualized rate, according to data from the U.S. Census Bureau. This is the largest increase since May, and well above Bloomberg estimates of a 1.44 million pace.
Both single-family and multifamily construction increased, with multifamily starts in particular rising 8.3% after a significant dip.
Permit applications also performed well, soaring to 1.52 million, the fastest rate since August. They offer an indication of future construction.
Builders are feeling optimistic as mortgage rates stabilize, enticing buyers off the sidelines.
Existing inventory remains constrained, making new construction a hot commodity for buyers.
“With the Federal Reserve expected to announce future rate cuts in the second half of 2024, lower financing costs will draw many prospective buyers into the market,” said NAHB Chief Economist Robert Dietz.
The Federal Open Markets Committee’s March meeting is this week. It is expected to keep rates steady while signaling its intent to cut them later this year.
Dietz noted that more demand also means higher costs.
“[As] home building activity picks up, builders will likely grapple with rising material prices, particularly for lumber,” Dietz added.
New homes are getting smaller and simpler in response to affordability pressures. The Washington Post recently reported that narrow homes with fewer cabinets, doors, and windows are the new fad.
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