New housing starts began to climb in February 2022 as builders started work on more single-family homes even as supply chain constraints continued to snarl residential construction.
American homebuilders recorded 1,769,000 new housing starts in February 2022, according to data released by the U.S. Census Bureau on Thursday, a 6.8 percent increase from the January’s seasonally adjusted rate of 1,657,000 and a significant 22.3 percent increase from February 2021, when only 1,447,000 starts were recorded.
Meanwhile, permits on new housing construction dipped modestly, with 1,859,000 tallied in February, down 1.9 percent from January. Permits for single-family builds were at 1,207,000 for February, down 0.5 percent from the previous month.
According to Census data, completions of privately owned housing increased 5.9 percent in February, to a seasonally adjusted rate of 1,309,000, but were 2.8 percent below the rate in March 2020, at the dawn of the pandemic.
Housing starts represent the number of housing units on which construction was started, and are used as an indicator to predict what the inventory of new homes will look like down the line. The increase in starts during February happened in spite of the supply chain crisis and surging lumber prices, which have resulted in consistently dampened homebuilder sentiment for four months in a row now.
“New residential construction is feeling the pressures of inflation, labor shortages and rising interest rates,” Realtor.com Senior Economist George Ratiu said in a statement. “The trends are also reflected in stumbling homebuilder sentiment, with the NAHB Market Index down for three consecutive months, on sliding buyer traffic and affordability concerns. In addition, with Russia’s war in Ukraine disrupting supply chains, and higher import duties on Canadian softwood, lumber prices shot up to over $1,300 per thousand board feet in February, not far from the May 2021 record-high.”
The strong showing for new starts in the face of bottlenecks and setbacks is likely fueled by the strong demand for new homes in a housing market with fewer than 1 million existing homes for sale, but construction costs are still having an impact on home affordability, according to the National Association of Home Builders.
“Builders continue to start homes as the demand for new construction remains solid in a market lacking inventory of previously owned homes,” NAHB Chairman Jerry Konter said. “However, construction costs are rising too quickly, which threatens housing affordability conditions in 2022 as interest rates rise.”