New home construction surged in February, as housing starts jumped 11.2 percent to a seasonally adjusted annual rate of 1.5 million, far surpassing expectations. The increase was led by a strong rebound in single-family homebuilding, a sign that builders are responding to demand despite lingering concerns over mortgage rates and supply constraints.
Single-family starts rose 11.4 percent to an annualized 1.11 million, the fastest pace in a year. Multi-family construction also posted a 10.7 percent increase, though that segment has shown more volatility in recent months. The strength in February’s report follows a period of stagnation in housing construction, particularly in the final years of the previous administration when builders faced high interest rates, rising costs, and regulatory uncertainty.
Economists had expected an increase in starts in February after an unusually cold January held back new projects. But the actual surge far exceeded expectations for a pace of 1.38 million starts. The January figure was revised down to 1.35 million from 1.366 million.
Even with the strong February gains, some indicators suggest that builders remain cautious about future projects. Building permits, a leading indicator of future construction, declined 1.2 percent, though they still came in slightly ahead of expectations. Single-family permits edged down just 0.2 percent, suggesting that while some builders are waiting for further clarity on economic conditions, there is still strong momentum in the sector.
Meanwhile, housing completions fell 4.0 percent, driven largely by a 20.7 percent decline in multi-family completions. However, single-family completions actually increased 7.1 percent, reinforcing the view that demand remains solid for newly built homes.
The surge in housing starts comes at a time when supply constraints have kept home prices elevated. While some analysts have pointed to mortgage rates as a potential headwind, builders are clearly moving forward with new projects, suggesting confidence in future demand.
The increase in new home construction also stands in contrast to some of the more downbeat economic indicators in recent weeks. While reports on consumer sentiment and retail sales have pointed to some lingering uncertainty, the housing sector’s strength signals that parts of the economy are still expanding.
With single-family home construction picking up pace and builders pushing forward despite higher costs, the February report suggests that the long-stalled housing market may finally be regaining its momentum.