Housing starts rise in February amid cost challenges

Single-family home starts rose 11.4% in February, driven by low existing inventory, but builders are grappling with high costs and labor shortages, the NAHB reported.

WASHINGTON – Limited existing inventory helped single-family home starts post solid gains in February, but builders are still grappling with high construction costs stemming from rate issues and ongoing shortages related to buildable lots and labor.

Overall housing starts increased 11.2% in February to a seasonally adjusted annual rate of 1.50 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The February reading of 1.50 million starts is the number of housing starts that homebuilders would make if development continued at this pace over the next 12 months. Within that total, single-family home starts rose 11.4% to a seasonally adjusted annual rate of 1.11 million, the highest rate since February 2024. The multifamily sector, which includes apartment buildings, grew 10.7% to an annual rate of 393,000.

“While solid demand and a lack of existing inventory provided a boost to single-family home production in February, our latest builder survey shows that builders are still concerned about challenging housing affordability conditions, particularly high financing and construction costs, as well as tariffs on key building materials,” said Buddy Hughes, chairman of the National Association of Home Builders (NAHB) and a home developer from Lexington, North Carolina.

“Despite high interest rates and policy uncertainty, continued lean levels of single-family home inventory helped boost production for families in February,” said Jing Fu, senior director, forecasts and analysis for NAHB. “NAHB expects single-family home starts to remain essentially flat in 2025, as the prospect of a better regulatory business climate is offset by uncertainty on the rate front. Meanwhile, multifamily construction is expected to remain soft in early 2025 due to challenging financing conditions, before stabilizing in the second half of the year.”

On a regional basis year to date, single-family and multifamily housing starts combined were down 4.7% in the Northeast, 21.5% in the Midwest, 8.3% in the South and 20.2% in the West.

Total permits fell 1.2% to an annual rate of 1.46 million units in February and were down 6.8% compared to February 2024. Single-family permits fell 0.2% to a rate of 992,000 units and were down 3.4% compared to the previous year. Multifamily permits fell 3.1% to a rate of 464,000.

Looking at regional permit data on a year-to-date basis, permits were down 30.1% in the Northeast, 2.3% in the Midwest, 2.1% in the South and 12.5% ​​in the West.

The number of single-family homes under construction in February fell 6.7% from a year earlier, to 640,000. The number of apartments under construction rose 0.3% in February to an annual rate of 772,000. That marked the first increase after 18 months of consecutive declines, but it was down 20% from a year earlier.