Moderating Interest Rates, Pent-up Demand Push Single-Family Starts Higher

Pent-up demand, moderating interest rates and a lack of existing inventory helped push single-family starts in February to their highest level since April 2022.

Overall housing starts increased 10.7% in February to a seasonally adjusted annual rate of 1.52 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The February reading of 1.52 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts increased 11.6% to a 1.13 million seasonally adjusted annual rate. Single-family starts are also up 35.2% compared to a year ago. The multifamily sector, which includes apartment buildings and condos, increased 8.3% to an annualized 392,000 pace.

“The solid level of single-family production in February tracks closely with rising builder sentiment, and with mortgage rates expected to moderate further this year, this will provide an added boost for single-family building,” said Carl Harris, chairman of the National Association of Home Builders (NAHB) and a custom home builder from Wichita, Kan. “But policymakers need to help the industry's supply-chains in order to protect housing affordability and add much needed supply to boost inventory.”

“Single-family housing is poised for a good year in 2024 with starts and permits on an upward trend,” said Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis. “The uptick in single-family permits is good news for the industry, which was hit hard by tight monetary policy last year. However, builders still face several supply-side challenges in the form of shortages and higher prices for buildable lots and labor.”

On a regional basis compared to the previous month, combined single-family and multifamily starts are 10.3% lower in the Northeast, 50.7% higher in the Midwest, 15.7% higher in the South and 7.9% lower in the West.

Overall permits increased 1.9% to a 1.52 million unit annualized rate in February. Single-family permits increased 1.0% to a 1.03 million unit rate. Multifamily permits increased 4.1% to an annualized 487,000 pace.

Looking at regional permit data compared to the previous month, permits are 36.2% higher in the Northeast, 3.8% higher in the Midwest, 1.3% lower in the South and 6.8% lower in the West.

The number of apartments under construction fell to 983,000 in February, while the number of single-family homes under construction stood at 683,000.