With lumber costs escalating and much of the country hamstrung by harsh winter weather, housing starts saw a stark decline in February, according to the latest numbers from the U.S. Census Bureau and the Department of Housing and Urban Development (HUD).
Privately owned housing starts during the month came at a seasonally adjusted annual rate of 1.42 million, down 9.3% year over year and 10.3% from January’s revised rate. The backtrack brought an abrupt halt to the trend of remarkably strong construction over the last few months, with February posting the slowest pace of housing starts since August.
Some cooling was expected, given the torrid pace of building and materials seeing both high prices and short supply. But with economists polled by Reuters initially forecasting a pace of 1.560 million February starts, it was clear that construction was set back farther than expected.
“Despite strength in buyer traffic and lack of existing inventory, builders are slowing some production of single-family homes as lumber and other material costs, along with interest rates, continue to rise,” said Chuck Fowke, chairman of the National Association of Home Builders (NAHB). “Shortages of lumber and other building materials, including appliances, are putting future construction expansion at risk.”
Single-family starts nationwide suffered, falling 8.5% from January, a drop that NAHB chief economist Robert Dietz also attributed to rising material costs.
“While single-family starts for the first two months of the year are 6.4 percent higher than the first two months of 2020, there has been a 36 percent gain over the last 12 months of single-family homes permitted but not started as some projects have paused due to cost and availability of materials,” said NAHB Chief Economist Robert Dietz. “Single-family home building is forecasted to expand in 2021, but at a slower rate as housing affordability is challenged by higher mortgage rates and rising construction costs.
Perhaps the most significant constraint faced by home builders in February, however, were the furious winter storms that gripped Texas during the month. The state is the nation’s largest new home market by far, comprising more than 15% of the entire country’s building permits last year. With the Lone Star State paralyzed, starts in the South plunged 16% month over month.
Permitting also dropped nationally from January, ending February at a seasonally adjusted annual rate of 1.68 million. That’s down 10.8% month over month, though it remains 17.0% over the February 2020 annual pace.