Single-family starts rise to decade high

The Scotsman Guide - Victor Whitman - 16 March 2017

Home building jumped up to the highest pace in a decade after a surge of building in the West region.

Single-family starts were estimated at an annual pace of 872,000, up 3 percent compared to the rate a year earlier and the highest annual pace since September 2007, the U.S. Census Bureau reported.

Overall, the annual pace of starts increased to 1.29 million, which is 6.2 percent higher than in February 2016.  

Multifamily construction fell 7.7 percent over the January level, but is up year over year by just over 11 percent.

The boost in single-family starts is welcome news in areas that have seen prices rise rapidly. On Wednesday, the Federal Reserve raised the short-term rate and is expected to raise it at least two more times this year, which is expected to push up longer-term rates and the cost of mortgages. 

"Right now, rents and housing costs are increasing faster than other components because of the stubborn housing shortages in much of the U.S.," said Lawrence Yun, chief economist of the National Association of Realtors, on Wednesday. "To contain inflation and slow the pace of future rate hikes, more home construction is needed now."

Starts are still running well below what is considered a normal level, however. According to an analysis by Trulia, starts are at just under 64 percent of the 50-year average. Trulia also noted that permitting activity also fell over the month, a sign that activity could slow down in the coming months. 

February’s gains in starts came in the West, which saw overall housing starts increase in the month by nearly 36 percent. Starts fell by 3.8 percent in the South over the January level, 4.6 percent in the Midwest and 9.8 percent in the Northeast.

Year over year, starts were up in all regions, except for the Midwest, where they are down by 11.4 percent.

The gains were consistent with the surging levels of building confidence that hit a 12-year high across the country earlier this month, according to the National Association of Home Builders (NAHB).

“We should see single-family production continue to grow throughout the year, tempered somewhat by supply-side constraints such as access to lots and labor,” said NAHB Chairman Granger MacDonald, a Kerrville, Texas-based builder.

NAHB Chief Economist Robert Dietz cautioned that the higher numbers could be partly attributable to the warmer weather through the country, which was only just interrupted in the Northeast this week by major snow storms. Dietz said that the drop in multifamily starts was expected.