Commentary Directory

US Housing Starts: February 2024

Jacob Hess
March 19, 2024

In February, housing starts surged by 10.7% MoM and 5.9% YoY to reach 1.52 million, surpassing expectations of 1.44 million. This robust growth in housing starts indicates continued strong momentum in the construction sector, reflecting optimism from the potential of lower interest rates which would lead to increased activity in the housing market. Permits issued also saw a healthy increase of 1.9% MoM and 2.4% YoY, confirming continued confidence among developers in future construction projects. However, it is worth noting that colder-than-expected winter in January likely trimmed completion rates then, so the jump in February starts could be partly affected by some January starts being delayed into the next month. Besides gains in housing starts and permits issued, the report also shows a remarkable uptick in the rate of homes completed of 19.7% MoM to 1.73 million. This is the highest rate of new home completions recorded since 2007.

The surge in housing starts, permits issued, and completed homes is excellent news for the U.S. housing supply, suggesting a promising trend in addressing the persistent shortage of available homes. The notable milestone of homes completed in February reaching levels not seen since 2007 underscores the resilience and strength of the housing market in spite of mortgage rates rising back above 6% in February. Homebuilders' proactive approach in ramping up construction activities indicates a strategic response to either anticipated Fed rate cuts or an expectation that demand for new housing can be sustained in spite of elevated financing costs. Indeed, higher financing costs could also be seen as a tailwind for homebuilders as existing home owners are unlikely to add to supply by putting their homes on the market if they are already locked into a low rate mortgage. In recent research, the FHFA estimates that this effect has already prevented 1.3 million home sales that could have taken place in a lower interest rate environment.