Home building bounced back much more sharply than expected last month, the latest indication that the economy has remained in high gear despite the Federal Reserve’s hesitancy to cut rates.
Residential housing starts rose 10.7 percent in February, the largest increase since May of last year. Construction on new homes was at a 1.52 million annualized pace, well above the 1.44 million forecast by Wall Street.
The rise in mortgage rates has kept many homes off the market as owners are reluctant to give up their current home loans. Most outstanding mortgages have interest rates much lower than current rates. This has given a big boost to home builders by pushing demand into the new home market.
Building permits rose to a 1.52 million rate, the fastest since August. That was slightly above expectations. Permits are often considered a leading indicator for the housing market.
Housing starts fell steeply in January, although the bigger-than-expected rebound suggests that harsh winter weather likely played a big role in that decline. The January figures were revised to show a shallower downturn, 12.3 percent to 1.37 million compared with the preliminary estimate of a 14.8 percent decline to 1.33 million.
On Monday, the National Association of Home Builders said its index of homebuilder sentiment had crossed above the threshold into positive market territory for the first time since July.
Single-family home starts rose 11.6 percent in February. Apartment construction rose 8.6 percent.
The rebound of sentiment and activity in the home-building sector underscores the strength of the economy. It is likely to reassure Fed officials that they can afford to continue to be patient when it comes to lowering interest rates.
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