Groundbreakings on new homes rose significantly on a year-over-year basis on the strength of single-family home construction, a housing report indicated Wednesday.
February housing starts rose 5.2% to a seasonally adjusted, annual rate of 1.178 million from January’s downwardly revised rate of 1.12 million, the U.S. Commerce Department said Wednesday. February’s rate was 30.9% above the housing starts pace one year earlier, when winter storms and tight credit conditions slowed momentum for both builders and buyers.
February’s numbers could indicate a turning point in the housing market. Because the Great Recession turned many would-be home buyers into renters as people lost homes to foreclosure or delayed home purchases as they suffered economically, builders focused on multi-family projects to meet the growing demand for rental housing. February’s numbers could indicate a shift back to single-family home building.
“Multi-family housing has probably peaked,” said Gus Faucher, deputy chief economist at PNC. “I think that’s good news for the overall economy, because single-family housing is more important to overall economic growth.”
Single-family housing starts rose 7.2% to a (seasonally adjusted, annual) rate of 822,000 in February. On a year-over-year basis, single-family starts were up a dramatic 37%. By contrast, starts on buildings with five or more units rose a modest 2.4% in February to a (seasonally adjusted, annual) rate of 341,000. On an annual basis, starts for multi-family buildings were up 16.8%, less than half the annual gain for new single-family home starts.
Overall, the numbers beat expectations of economists surveyed by Bloomberg ahead of the release, and total housing starts for both January and December were revised up.
Wednesday’s report also revealed that February groundbreakings were up in all regions of the U.S. except for the Northeast. Starts rose 19.9% in the Midwest, 7.1% in the South, and 26.6% in the West; they tumbled 51.3% in the Northeast.
Though groundbreakings were up, permitting–a key indicator for the housing market’s future–trended down last month, and in fact permits have fallen or stayed flat the past three months. In February, permitting fell 3.1% from January to a (seasonally adjusted, annual) rate of 1.167 million, though that level was still up 6.3% year-over year. Permitting for buildings with five or more units was down 9.1% at a (seasonally adjusted, annual) rate of 401,000 in February; that loss was offset by an 0.4% gain in permitting for single-family homes in February to 731,000, up from a January’s upwardly revised 728,000.
“Today’s release reflects a positive start to the year especially in single-family construction, but it also signals a potentially problematic trend in permits no longer outpacing starts,” said Jonathan Smoke, chief economist at realtor.com. “The overall takeaways from this report are that month-to-month we are seeing the expected growth in new construction, but we also appear to be at an inflection point with regard to single-family construction now growing faster than multi-family.”
On a regional basis, permitting fell everywhere but the Northeast. Permitting was down 11.4% in the Midwest, 4.4% in the South, and 7.2% in the West. In the Northeast permitting rose 40.4% in February.
Builder confidence in the market for newly constructed, single-family homes held steady in March, staying flat at a level of 58, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index released Tuesday. A reading of 50 or higher means that more builders rate conditions are good than poor. In October, the measure hit a decade-high of 65.
Mortgage rates (30-year fixed, conventional) stood at 3.68% for the week ended March 10, according to Freddie Mac . The unemployment rate was flat at 4.9% in February, maintaining its lowest level in eight years for two months running.
Reposted from Forbes.