- The Housing starts were stronger than market expectations for 1,264k annualized units.
- The increase relative to January (1,251k) was in single unit structures, which recorded a fresh cycle high in February. Multi-unit starts moderated in the month but remained firm relative to last year’s pace.
- Regionally, all of the increase was in the West as starts rebounded following a sharp decline in the previous month.
- A mild start to the year likely provided some boost to homebuilding activity in January and February.
- Permit issuance slowed to 1,213k in February although the three-month trend in permits remained at a 1½ year high.
Our Take:
After remaining range-bound for much of last year, housing starts picked up toward the end of 2016 – a trend that has continued so far this year with activity remaining firm in January and February. We see a number of fundamentals – including a strong labour market and income growth, accommodative financial conditions, further easing in mortgage lending standards, and tight supply in the resale market – supporting continued improvement in homebuilding this year. As well, solid permit issuance and rising homebuilders’ confidence (the latter now close to the previous cycle’s peak when starts were running above 2 million) point to activity remaining strong in the near-term, even if some of the recent warm-weather boost trails off in the coming months. We look for housing to make a decent contribution to GDP growth this year; today’s stronger-than-expected increase boosts our monitoring for Q1 residential investment (a double-digit annualized increase now looks within reach), supporting our forecast for 2% growth in the current quarter.
