U.S. Housing Starts Surge 11.2% in February, But Falling Permits Signal Future Slowdown

U.S. Housing Starts Surge in February, Building Permits Decline

The U.S. housing market showed mixed signals in February, with a sharp rise in housing starts contrasting with a decline in building permits. According to the latest data from the U.S. Census Bureau, new residential construction activity picked up, but future construction intentions weakened, raising questions about the sector’s near-term strength.

Housing Starts Rebound Sharply

Privately-owned housing starts surged to a seasonally adjusted annual rate of 1.501 million in February, marking an 11.2% increase from January’s revised figure of 1.350 million. The single-family sector led the gains, with starts rising 11.4% to 1.108 million units. However, despite this strong monthly performance, overall starts remained 2.9% below February 2024 levels, signaling ongoing challenges in year-over-year growth.

Building Permits Continue to Decline

Building permits, a key indicator of future construction, fell 1.2% month-over-month to an annualized rate of 1.456 million. This decline extended the downward trend, with permits now 6.8% below year-ago levels. Single-family authorizations remained relatively stable at 992,000, down just 0.2% from January. However, permits for multi-family units in buildings with five or more units dropped to 404,000, indicating softer demand in the rental market.

Housing Completions Ease

Housing completions declined 4.0% in February to a seasonally adjusted annual rate of 1.592 million. Compared to the same period last year, completions were down 6.2%, reflecting ongoing supply chain and labor constraints. Single-family completions, however, rose 7.1% to 1.066 million, signaling a stronger push to deliver finished homes to the market.

Market Outlook

The surge in housing starts suggests builders are responding to improved demand conditions, potentially fueled by stabilizing mortgage rates. However, the decline in permits raises concerns about future construction activity, particularly in the multi-family segment. If borrowing costs remain steady and buyer demand holds firm, the market could see continued strength in single-family home construction. However, a sustained drop in permits may indicate a slowdown in new projects in the months ahead. Traders should monitor upcoming economic data and interest rate trends for further clarity on the sector’s direction.