Inman News /Real Trends
American homebuilders tallied 1,769,000 new housing starts in February 2022, a 6.8% uptick from January, according to data released Thursday by the US Census Bureau, and apartment construction reached highest pace since the start of the pandemic.
New housing starts began to climb in February 2022, as builders started work on more single-family homes even as supply chain constraints continued to snarl residential construction.
American homebuilders recorded 1,769,000 new housing starts in February 2022, according to data released by the U.S. Census Bureau on Thursday, a 6.8 percent increase from the January’s seasonally adjusted rate of 1,657,000 and a significant 22.3 percent increase from February 2021, when only 1,447,000 starts were recorded.
Meanwhile, permits on new housing construction dipped modestly, with 1,859,000 tallied in February, down 1.9 percent from January. Permits for single-family builds were at 1,207,000 for February, down 0.5 percent from the previous month.
According to Census data, completions of privately owned housing increased 5.9 percent in February, to a seasonally adjusted rate of 1,309,000, but were 2.8 percent below the rate in March 2020, at the dawn of the pandemic.
Housing starts represent the number of housing units on which construction was started, and are used as an indicator to predict what the inventory of new homes will look like down the line. The increase in starts during February happened in spite of the supply chain crisis and surging lumber prices, which have resulted in consistently dampened homebuilder sentiment for four months in a row now.
“New residential construction is feeling the pressures of inflation, labor shortages and rising interest rates,” Realtor.com Senior Economist George Ratiu said in a statement. “The trends are also reflected in stumbling homebuilder sentiment, with the NAHB Market Index down for three consecutive months, on sliding buyer traffic and affordability concerns. In addition, with Russia’s war in Ukraine disrupting supply chains, and higher import duties on Canadian softwood, lumber prices shot up to over $1,300 per thousand board feet in February, not far from the May 2021 record-high.”
The strong showing for new starts in the face of bottlenecks and setbacks is likely fueled by the strong demand for new homes in a housing market with fewer than 1 million existing homes for sale, but construction costs are still having an impact on home affordability, according to the National Association of Home Builders.
“Builders continue to start homes as the demand for new construction remains solid in a market lacking inventory of previously owned homes,” NAHB Chairman Jerry Konter said. “However, construction costs are rising too quickly, which threatens housing affordability conditions in 2022 as interest rates rise.”
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Well, that’s encouraging. After dropping 4.1% in January, housing starts were back up in February, rising 6.8% month over month to a seasonally adjusted annual rate of 1.769 million according to a report released Thursday by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
This is 22.3% above the rate recorded a year ago.
“The number of single-family homes under construction increased to the highest level since 2006,” First American deputy chief economist Odeta Kushi said in a statement. “While builders are continuing to push to meet demand, supply-side headwinds slow the home-building momentum at a time when the housing market desperately needs more supply relief.”
Construction of single-family homes rose 5.7% from January to 1.215 million units. The multifamily sector, which includes apartment buildings and condos, also saw an increase, rising 9.3% to an annualized pace of 554,000. This is the best rate of apartment construction since January 2020.
“Builders continue to start homes as the demand for new construction remains solid in a market lacking inventory of previously owned homes,” Jerry Konter, chairman of the National Association of Home Builders (NAHB), said in a statement. “However, construction costs are rising too quickly, which threatens housing affordability conditions in 2022 as interest rates rise.”
The number of building permits issued in February came in at a seasonally adjusted rate of 1.859 million, a 1.9% drop from the month prior, but still 7.7% above the February 2021 rate.
“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,” NAHB chief economist Robert Dietz said in a statement. “This is an indication of the ongoing supply-chain delays and cost issues that are limiting the pace of home building in many markets.”
Housing completions came in at a seasonally adjusted rate of 1.309 million, a 5.9% month-over-month increase. However, it remains 2.8% below the February 2021 rate.
Despite these promising numbers, in March, homebuilder sentiment in the market for newly built single-family homes dropped below the 80-point mark for the first time since September 2021 according to the National Association of Home Builders (NAHB) and Wells Fargo Housing Market Index (HMI) report. Experts say that continued supply chain issues, labor shortages, rising material costs and rising interest rates are to blame.
“As mortgage rates rise, all else held equal, house-buying power falls,” Kushi said in a statement. “Homebuilder confidence fell in March as builders continue to face supply chain disruptions, price increases, and concerns that declining affordability will price out buyers.”
Regionally, housing starts saw month-over-month increases of 28.7% in the Northeast, 15.3% in the Midwest, 11.4% in the South and a 11.4% decrease in the West.
Nationwide there are currently 799,000 single-family homes under construction, up 28.3% compared to a year ago.