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New residential housing starts beat expectations in February as builders stayed resilient amid rising costs and policy confusion, data issued Tuesday by the U.S. Census Bureau and the Department of Housing and Urban Development shows.
Privately owned housing starts rebounded forcefully, rising 11.2 percent from January to February and hitting a seasonally adjusted rate of 1,501,000 — while still falling 2.9 percent below February 2024. Single-family home construction followed a similar pattern, rising 11.4 percent to 1,108,000 on a monthly basis.
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“Housing starts surprise to the upside, rebounding strongly from the steep decline in January,” First American Deputy Chief Economist Odeta Kushi said.
“Recall that the January decline was a function of several factors: a colder than usual January, mortgage rates crossing the 7 percent threshold in January, and ongoing builder pessimism reflecting lingering supply-side and affordability headwinds.”
Odeta Kushi | First American Deputy Chief Economist
On the permit side, privately-owned housing permits edged down 1.2 percent from January, reaching an annual rate of 1,456,000 — 6.8 percent lower than the previous year. Single-family home permits saw only a slight dip of 0.2 percent, landing at 992,000.
While housing starts showed strength, completions moved in the opposite direction, falling 4.0 percent to a seasonally adjusted rate of 1,592,000 — 6.2 percent lower than a year ago. However, single-family completions bucked the trend, rising 7.1 percent to 1,066,000.
New Residential Construction | U.S. Census Bureau
“The higher rate of completions is immediate relief to a supply-constrained market,” Kushi noted. “The regions that saw the largest month-over-month increases in single-family completions were the Northeast and the Midwest. The level of completions in the Northeast was the highest since April 2024, while the growth in the Midwest was a rebound from the big drop in January.”
While these gains are promising, Kushi cautioned that builders still face challenges.
“The smoothed single-family permits and starts data shows a modest positive trend, but there are headwinds that could hinder any positive momentum,” she said. “While builders have benefitted from a chronic housing shortage made worse by the ‘sellers’ strike’ fueled by higher mortgage rates, competition from existing-home inventory has picked up, especially in key builder markets like Florida and Texas.”
Adding to concerns, builder sentiment took a hit in February due to rising costs and policy uncertainty.
“Builders face persistent supply-side and affordability challenges, from higher material costs to a shortage of skilled labor,” Kushi said. “Material costs are still about 40 percent higher than pre-pandemic levels, making construction more expensive. Recent tariff actions could push costs even higher, with builders estimating an additional $9,200 per home. If tariffs persist, builders will have no choice but to pass on the costs to consumers, who are already struggling with housing affordability.”
Despite these hurdles, there are several reasons for optimism. Kushi noted that builders have tools at their disposal to keep demand strong, including their ability offer incentives and rate buydowns, which builders will likely use as a key strategy further into the year.
