- U.S. housing starts fell by 10.3% to 1.42 million units (annualized) in February from 1.58 million units in January. The February outturn came in below market expectations, which called for a mild moderation to 1.57 million units.
- Single-family starts fell by 8.5% (or 96k) to 1.04 million units, while starts in the smaller and more volatile multi-family segment fell by 15% (or 67k) to 381k units.
- Building permits fell by a similar margin. Permitting activity pulled back 10.8% to 1.68 million in February. The single-family segment fell by 10% or 127k to 1.14 million units. Multifamily permits fell by 12.5% or 77k to 539k units.
- Housing starts fell across most regions. The Northeast (-39.5%) led the way, giving back much of the gain in the month prior, followed by the Midwest (-34.9%) and South (-9.7%). The West was the only region to record an improvement in February, with housing starts up 17.6% on the month.
Key Implications
- Housing starts are off to a slow start in 2021. Activity pulled back for second consecutive month in February, accentuating the decline that began at the start of the year. Higher input costs and rising interest rates, factors that have chipped away at builder confidence in recent months, likely played a role in the pullback. The price of lumber, which has surged to unprecedented levels recently and is adding about $24,000 to the price of an average single-family home according to the National Association of Homebuilders, is of particular concern.
- Despite the speedbump that has been the last two months, we see scope for homebuilding activity to remain elevated near current levels. This is thanks to a very low inventory environment and the fact that housing demand will remain supported as the labor market healing continues this year amidst improving public health conditions and a significant injection of cash in the economy from the latest stimulus package.
