US home building rebounded in February at the fastest pace since 2006, suggesting builders were more successful in managing material and labor constraints during the month.
Residential housing starts rose 6.8% last month to an annualized rate of 1.77 million, according to government data released Thursday. Building applications, an indicator of future construction, fell to 1.86 million annualized units but remained elevated.
The median estimate from a Bloomberg survey of economists predicted a pace of 1.7 million housing starts in February.
The data points to a recovery in construction activity after weather conditions and omicron-related worker absences dampened construction in January. Yet builders are struggling to keep up with buyer demand in the face of tight supply chains, high commodity prices and an ongoing struggle to attract skilled labor.
Looking ahead, Russia’s invasion of Ukraine has disrupted global supply chains and caused commodity prices to spike. Data released on Wednesday showed U.S. homebuilder confidence fell to its lowest level in six months in March, as the outlook for sales was at its lowest since June 2020.
Single-family housing starts rose 5.7% in February to an annualized rate of 1.22 million units. Multifamily housing starts, which include apartment buildings and condominiums, rose to 554,000, the fastest pace since January 2020.
Inflation – currently rising at the fastest rate in 40 years – is eroding affordability. The Federal Reserve raised interest rates for the first time since 2018 on Wednesday and is set to implement several more rate increases this year. A direct consequence will be an increase in mortgage rates, which are already at their highest level for nearly three years.
Yet the labor market remains strong. A separate report on Thursday showed jobless claims fell by 15,000 to 214,000 last week, the lowest level this year.
The number of homes cleared for construction but not yet started was little changed in February at the highest level since 1974, suggesting a strong pipeline for builders in the months ahead. The number of single-family homes under construction continued to rise, now at the highest level since late 2006.