U.S. Housing Starts Rebound To Highest Rate Since June 2006 In February

After reporting a sharp pullback in new residential construction in the U.S. in the previous month, the Commerce Department released a report on Thursday showing housing starts rebounded by much more than expected in the month of February.

The report showed housing starts spiked by 6.8 percent to an annual rate of 1.769 million in February after plunging by 5.5 percent to a revised rate of 1.657 million in January.

Economists had expected housing starts to jump by 3.2 percent to a rate of 1.690 million from the 1.638 million originally reported for the previous month.

With the much bigger than expected increase, housing starts reached their highest annual rate since hitting 1.802 million in June of 2006.

Single-family housing starts surged by 5.7 percent to an annual rate of 1.215 million, while multi-family housing starts soared by 9.3 percent to a rate of 554,000.

Meanwhile, the report showed building permits slumped by 1.9 percent to an annual rate of 1.859 million in February after rising by 0.5 percent to a revised rate of 1.895 million in January.

Building permits, an indicator of future housing demand, had been expected to tumble by 2.6 percent to a rate of 1.850 million from the 1.899 million originally reported for the previous month.

The sizable pullback came after building permits reached their highest annual rate since May of 2006 in January.

Single-family permits edged down by 0.5 percent to a rate of 1.207 million, while multi-family permits plunged by 4.4 percent to a rate of 652,000.

“Strong demand, sparse inventory, relatively upbeat homebuilder sentiment and a large backlog of starts – which were at a record level in February – should support new home construction this year,” said Nancy Vanden Houten, Lead Economist at Oxford Economics.

She added, “Still, housing starts are likely to lose some momentum over the course of the year, with higher interest rates and elevated construction costs weighing on activity.”

On Wednesday, the National Association of Home Builders released a separate report showing a bigger than expected decrease in U.S. homebuilder confidence in the month of March.

The report showed the NAHB/Wells Fargo Housing Market Index dropped to 79 in March from a downwardly revised 81 in February. Economists had expected the index to edge down to 81 from the 82 originally reported for the previous month.

The NAHB noted the index dropped below 80 for the first time since last September as increasing development and construction costs have taken a toll on builder confidence even as buyer demand remains relatively solid.

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