• Housing starts increased in February to 1.45 million, up 9.8% from January’s revised estimate but down 18.4% from February 2022, according to the U.S. Census Bureau. 
• Housing permits issued in February increased to 1.52 million (SAAR), that is 13.8% above January’s level but still down 17.9% when compared to a year ago.
• 1.56 million (SAAR) homes were completed in February, up 12.2% from January 2023 and up 12.8% year-over-year.

Although housing demand has fallen from a year ago, housing market activity remains slightly above pre-pandemic levels. That coupled with the lack of existing homes coming on the market is likely causing builders to reconsider whether or not to stay on the sidelines.

While it takes longer to build these days due to stubbornly high construction costs, material supply disruptions and labor shortages, the recent uptick in housing demand could be what’s supporting builder confidence. 

While multifamily starts continued to drive new construction, the decline in single-family starts may be near a bottom. This comes after longer term interest rates – including mortgage rates – neared a 4-month low. The increase in new construction highlights how highly sensitive the housing sector is to interest rates. 

But this is still a look in the rear view mirror. Recent stress to the financial system, inflation concerns and the Federal Reserve’s next moves will likely have an outsized impact on whether this rebound in new building activity continues. 

In the meantime, the large number of completions bodes well for home buyers this spring.