The housing market may be red hot, but it’s also strained by inflationary challenges, and construction costs have been especially impacted. Still, total housing starts showed positive gains in February as demand remained high in the broader housing market that is suffering from record-low levels of inventory.
According to the U.S. Department of Housing and Urban Development (HUD) and the U.S. Census Bureau, overall housing starts increased by 6.8% in February to a seasonally adjusted annual rate of 1.77 million units. This is 22.3% higher than the same period in 2021.
Key findings:
- Single family starts increased 5.7% to a 1.22 million seasonally adjusted annual rate in February.
- Multifamily homes had an especially strong showing, with an increase of 9.3% to an annualized pace of 554,000.
- The Northeast saw an overall increase of 28.7% in February versus the previous month.
- The Midwest was up 15.3% versus the previous month.
- The South was 11.4% higher in February versus the previous month.
- The West, on the other hand, fell by 11.4% in February versus the prior month.
- Overall building permits, one of the most reliable leading indicators, decreased by 1.9% to a 1.86 million unite annualized rate.
- Single-family permits only suffered a slight 0.5% dip month-over-month to a 1.21 million unite rate.
- Multifamily permits decreased to an annualized 652,000 pace.
- The Northeast saw the highest increase of building permit month-over-month gains at 22.7%.
- The West increased by 2.1%.
- The Midwest and the South both saw monthly decreases in building permits, 8.4% and 5.5% lower, respectively.
- Currently, there are 799,000 single-family homes under construction. This is 28.3% higher year-over-year.
The takeaway:
“Builders continue to start homes as the demand for new construction remains solid in a market lacking inventory of previously owned homes,” said Jerry Konter, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Savannah, Georgia. “However, construction costs are rising too quickly, which threatens housing affordability conditions in 2022 as interest rates rise.”
“The February pace for apartment construction was the best since January 2020 and we expect the multifamily sector to continue to show strength as the economy reopens,” said NAHB chief economist, Robert Dietz. “On the single-family front, the count of homes permitted but not started construction reached a four-month high in February, rising to 152,000. This is an indication of the ongoing supply-chain delays and cost issues that are limiting the pace of home building in many markets.”
