In February, housing starts jumped by the most in nine months, while building permits spiked by the most since August.
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Housing market activity has been muted over the last several years due to high mortgage rates and home prices, as well as limited inventory.
Yet the latest batch of economic data suggests the landscape may be starting to shift and more housing options are becoming available for buyers.
In February, housing starts climbed 10.7% month-over-month versus January's revised estimate, above the median forecast of 8.2%, according to a report released Tuesday by the US Census Bureau and the Department of Housing and Urban Development. It's the highest gain in nine months and marks a strong reversal of the 12.3% month-over-month decline seen in January.
Housing starts came in 5.9% higher than a year ago. In total, privately owned housing starts grew to 1.521 million units, seasonally adjusted. Single-family housing starts last month rose 11.6% to hover near two-year highs.
Building permits also climbed 1.9% month-over-month to hit 1.518 million. That was above the median forecast for a 0.5% gain, and marked the biggest leap since August.
"The composition was strong, as four-fifths of the February increase came from the single-family starts component (+11.6%), while the more volatile multi-family starts component also increased (+8.3%)," Goldman Sachs strategists wrote in a note Tuesday.
Goldman Sachs Investment Research
Housing completions, too, came in at 1.729 million, 19.7% higher than the revised January estimate and 9.6% higher versus one year ago.
Meanwhile, the NAHB homebuilder confidence index for March moved into positive territory for the first time since July, climbing above 50, the level associated with neutral sentiment.
The "current sales conditions" gauge increased the most, from 52 to 56, as builders reported an uptick in home demand.
A loosening housing market and improved inventory could bring relief to Americans who have endured the "lock-in" effect since the pandemic as current owners stay put to hold on to low mortgage rates they secured years ago.
"Over the next two years we're forecasting very different paths for single and multi-family construction," Capital Economics strategists wrote in a Tuesday note. "We think single-family starts will benefit from the lack of second-hand homes on the market, which shifts demand to newbuilds. But we expect that strength will be offset by weakness in the multi-family starts, leaving total housing starts little higher than they currently are by end-2025."
