New home starts on single-family homes decreased slightly in February from the month before, but overall new home starts are still up from last year.
Privately owned housing starts dropped by 7% from January’s 1.33 million to 1.24 million in February, according to the latest release from the U.S. Census Bureau. This is also down 4% from 1.29 million in February 2017.
But this decrease was due to a drop in multifamily building starts, as single-family housing starts increased 2.9% from 877,000 in January to 902,000 in February.
“All of the decline came from volatile the multifamily sector, which plummeted by 26.1%, the largest monthly drop since late 2016,” Nationwide Chief Economist David Berson said.
And new construction may not increase anytime soon. Privately owned housing units authorized by building permits decreased 5.7% from January’s 1.38 million to 1.3 million in February. This is up 6.5% from February 2017, when building permits totaled 1.22 million.
Single-family authorizations also decreased in February to 872,000, down 0.6% from January’s 877,000.
But one expert pointed out the construction industry could start seeing more activity after February’s increase in construction labor.
“As we analyze today’s housing starts data, it’s important to also consider the impact of construction labor on the velocity of new home construction,” First American Chief Economist Mark Fleming said. “The employment situation report, released earlier this month, reported an increase of nearly 7,000 residential construction jobs between January 2018 and February 2018. In fact, February was the best month for residential construction labor growth since August 2008.”
But one expert cautioned this could lead to at least 200,000 fewer homes being built this year.
“Housing starts in February disappointed, with starts down 7% and permits down 5.7% from January,” said Robert Frick, Navy Federal Credit Union corporate economist. “Builders report they would like to build more, but they continue to be hamstrung by the ‘three L's’ – land, labor and lumber.”
“The lack of lots zoned for building, skilled workers and the high cost of materials mean about 200,000 fewer homes than the historical average will be built this year,” Frick said.
Privately owned housing completions increased in February to a seasonally adjusted annual rate of 1.32 million, up 7.8% from January’s 1.22 million and up 13.6% from 1.16 million in February 2017.
Single-family housing completions also increased, rising 3% from 869,000 in January to 895,000 completions in February.
“The fall in housing starts in February is a movement in the wrong direction,” said Lawrence Yun, National Association of Realtors chief economist. “The key to economic prosperity at this juncture of economic expansion is to produce more new homes. That will help with job creation and reduce the swift price appreciation in several markets.”