Home building rebounded this month with a surge in single-family home construction, inducing starts, permits, and completions, signaling newfound confidence in the housing market and economy.
The U.S. Census Bureau and the HUD on Wednesday jointly released new residential construction statistics for February 2016, which showed single-family housing starts bounced back more than expected in February to their highest level in five months, led by a the largest jump in single-family units in nine years.
According to the data, February's housing starts rose 5.2 percent to an annual rate of 1,178,000, compared to January's estimate of 1,120,000. Year-over-year housing starts experienced major gains, rising 30.9 percent compared to the February 2015 rate of 900,000. Overall starts have not been this high since September 2015 when the figure was 1,207,000.
On the singe-family side, housing starts were at a rate of 822,000 in February, up 7.2 percent from the revised January figure of 767,000. Single-family starts have not been this high since November 2007 when they were at 833,000.
"The very positive single-family report further supports other housing and general economic reports that the housing recovery continues unabated," said David Crowe, National Association of Home Builders Chief Economist and SVP. "Low mortgage rates, increases in employment, continued US economic expansion and growing pent up demand particularly among existing home owners are supporting more single-family home building."
According to the Bureau and HUD, authorized building permits in February were at an annual rate of 1,167,000, down 3.1 percent from the revised January rate of 1,204,000. Permits, however, remain positive year-over-year, gaining 6.3 percent from last year's estimated rate of 1,098,000. Single-family permits came in at 731,000 in February, rising 0.4 percent from the revised January figure of 728,000, the report said.
Realtor.com's Chief Economist, Jonathan Smoke, said that today's residential news reflects "a positive start to the year especially in single-family construction, but it also signals a potentially problematic trend in permits no longer outpacing starts. It is somewhat concerning that the pace of starts is now greater than the pace of permits. This could be a one-month anomaly given the tendency of the starts data to be revised, but if the pattern holds, it would signal slower growth ahead in construction activity. That is not what the market needs to address the undersupply of both for sale and for rent units on the market."
In terms of housing competitions, the Bureau and HUD said they were at an annual rate of 1,016,000, falling 4.2 percent from January's estimate of 1,060,000. Year-over-year, completions are 17.5 percent above the February 2015 rate of 865,000. The data showed that single-family housing completions rose 6.1 percent to a rate of 736,000 in February compared to January's rate of 694,000.
Crowe concluded, "First time homeowners are eight times more likely to buy an existing home over a new home so the avenue for more homeowners is being dammed by lack of existing home inventory. Moreover, eight-in-10 new home buyers are existing home sellers so demand for new homes is also being limited by the reluctance or inability of existing home owners to sell their home and release the equity needed to buy a new home. More existing homes for sale will boost the new home market demand and induce more builders to build."
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