Home construction in the US rose in February

Washington
CNN
—

US housing construction rebounded in February, reversing after five consecutive months of falling.

The number of new residential buildings, an indicator of new housing construction, increased by 9.8% in February compared to January. But it is still less by 18.4%. compared to last year, according to data released Thursday by the Census Bureau. The seasonally adjusted number of launches in January rose to 1,450 million year-on-year from a revised January estimate of 1,321 million.

New home builds plummeted in May and July last year as mortgage rate hikes pushed many would-be homebuyers to the sidelines. Launches recovered slightly in August but have been declining ever since.

The number of single-family homes under construction rose 1.1% in February from a seasonally adjusted 830,000 in January.

As mortgage rates declined from November to January, property developers have become more optimistic that conditions could improve in 2023. But recent strong economic data and uncertainty in the banking sector mean inflation concerns remain, along with volatile mortgage rates.

Building permits, which tracks the number of new housing units granted permits, jumped for the second month in a row in February, up 13.8% from a revised figure in January and down 17.9% from a year ago. In February, the number of seasonally adjusted building permits was 1.524 million per year.

“Going into the spring home sales season, builders have shown signs of optimism in anticipation of increased buyer demand,” said Kelly Mangold of RCLCO Real Estate Consulting. “However, interest rates and development costs remain high while prices are falling, which is impacting potential growth in home sales.”

And mortgage rates remain volatile for buyers. Rates rose by half a percentage point during February but are now falling again as uncertainty in the banking industry forced investors to abandon the relative safety of bonds.

The historically low stock of existing homes – many owned by homeowners unwilling to sell and part with ultra-low mortgage rates – is pushing many buyers towards new home construction.

“The number of existing homes on the market is at an all-time low, reducing competition for new homes — and they are often the only option for motivated buyers,” Mangold said.

According to fresh analysis of the housing marketbetween 2012 and 2022, there were about 6.5 million homes shortfall in the United States. New construction of all kinds is critical to closing this gap.

“We are currently in a period of economic uncertainty and it is possible that we will see improvements over the course of the year, or else starts may continue to decline if we enter a true recession,” Mangold said.