Due to favorable temperatures and a shortage of pre-owned homes, U.S. single-family homebuilding rose to its highest level in nearly two years in February.
Builders are lowering prices and offering other incentives to boost sales despite increased mortgage rates for first-time buyers. To offset increasing material prices, they are building smaller homes. On Tuesday, the Commerce Department reported that single-family home permits surged to more than a 1-1/2-year high last month.
Homebuilding may boost economic growth this year as mortgage rates fall in anticipation of Federal Reserve rate cuts by June. "Single-family starts could remain strong in the next couple of months as builders see demand for new builds despite buyer headwinds," said Nationwide economist Daniel Vielhaber.
"Rate incentives from builders continue to help buyers afford homes on the new side of the market." Single-family housing starts, which make up most homebuilding, rose 11.6% to 1.129 million units last month, according to the Census Bureau. It was the highest since April 2022.
Single-family starts fell to 1.012 million units in January, up from 1.004 million. The U.S. central bank's aggressive rate hikes to fight inflation have hurt the housing market, but a housing shortage has kept most homeowners locked into cheaper mortgage rates.
The government reported 757,000 dwelling units for sale in the fourth quarter, down from 1.145 million before the COVID-19 outbreak. On Monday, the National Association of Home Builders reported that single-family home builders' confidence reached an eight-month high in March on optimism about sales now and in the coming six months.
The Fed's policy rate was projected to remain in the 5.25%-5.50% range after a two-day meeting on Wednesday, after been lifted by 525 basis points since March 2022. Freddie Mac reports that the average 30-year fixed-rate mortgage has fallen in recent weeks after flirting with 7% in late February.
Single-family homebuilding rose 40.2% in the Midwest and 16.6% in the heavily populated South. It rose 16.4% in the Northeast and fell 15.4% in the West. Housing project starts with five or more units rose 8.6% to 377,000. February housing starts rose 10.7% to 1.521 million units.
follow for more updates