U.S. Housing Market Rallies, A Glimpse of Revival Amid Economic Challenges

The housing market began showing signs of life last month, as housing starts rose by 9.8% from January, following a five-month downturn. The Census Bureau tempered that with data issued Thursday showing starts were still 18.4% below the same period last year.

The seasonally adjusted annual rate of housing starts climbed to 1.45 million, up from January's revised estimate of 1.321 million.

From November through January, lower — but still high — mortgage rates bolstered builder optimism for 2023, though concerns about inflation and fluctuating mortgage rates linger due to robust economic data and an uncertain banking sector.

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Single-family housing starts saw a modest 1.1% increase in February, reaching a seasonally adjusted annual rate of 830,000, while multifamily projects took the lead, soaring 24.1% from January and 14.3% from February 2022.

Building permits, an indicator of future home construction, saw a 13.8% increase to a seasonally adjusted annual rate of 1.524 million in February. Though issued permits remained 17.9% lower than the previous year.

Meanwhile, homebuilder sentiment has been on the rise, with supply chains gradually normalizing, and home purchase applications increasing. But, construction firms continue to grapple with high mortgage rates and elevated labor and material costs.

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) reported a two-point uptick in builder confidence for newly-built single-family homes in March, reaching 44 — the third consecutive month of rising builder sentiment.

Though still high long-term interest rates coupled with the cost and limited availability of housing inventory continue to pose significant challenges for prospective homebuyers.

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Photo: Leszek Glasner via Shutterstock