U.S. housing starts bounced back in March to the fastest rate since 2006, exceeding forecasts and indicating residential construction is getting back on track after a winter storm-related setback.
Builders began construction on homes and apartments at a seasonally adjusted annual rate of 1.74 million units in March, the Commerce Department reported Friday, a 19.4% increase over February when housing construction fell by 11.3%. It was the fastest pace for homebuilding since a level of 1.8 million in June 2006 during the last housing boom.
Severe storms raked several regions of the country in February, setting construction back.
Single-family starts rose 15.3% in March to an annualized 1.24 million, close to the highest since 2006. Multifamily starts -- which tend to be volatile and include apartment buildings and condominiums -- increased 30.8%.
Applications to for building permits, a proxy for future construction, increased 2.7% to an annualized 1.77 million units, while the number of one-family homes authorized for construction but not yet started -- a measure of backlogs -- rose to 124,000 in March, the most since May 2007.
A report on Thursday showed a measure of homebuilder sentiment improved in April, suggesting companies expect steady growth in the housing market heading into the second quarter.
Economists expect housing construction to remain strong this year given the record low level of homes for sale. A new report from mortgage giant Freddie Mac concluded that the housing market is 3.8 million single-family homes short of what's needed to meet demand.
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"We expect the pace of housing starts to moderate slightly over the balance of 2021 but still look for starts to increase more than 6% this year," Nancy Vanden Houten, lead economist at Oxford Economics, said in a research note.
Housing was one of the star performers last year in an economy struggling with a global pandemic. Housing construction rose 6.9% to 1.38 million units for the year.
Federal Reserve Chairman Jerome Powell said this week that most Fed policymakers don't see raising interest rates until 2024, which should help keep mortgage rates low and support the housing market.
Builders are grappling with lumber prices, which have tripled in the past year, and supply chain shortages for such things as appliances while homebuyers are facing higher prices because of the low inventories. However, builder confidence remains strong. The latest National Association of Home Builders/Wells Fargo survey saw an increase in its confidence index to 83 in April, up from 82 in March. Any reading above 50 shows builders are optimistic about the future.
The Commerce report Friday showed that construction of single-family homes was started at a seasonally adjusted annual rate of 1.24 million units in March, up 15.3% from February. Construction in the smaller and often more volatile apartment sector jumped 30% to an annual rate of 477,000 units.
By region of the country, construction was up in all parts of the country except the West which had a 12.6% decline. Construction activity surged 122.8% in the Midwest and posted gains of 64% in the Northeast and 13.5% in the South.
March data on both existing- and new-home sales will be released next week.
Information for this article was contributed by Martin Crutsinger of The Associated Press and by Olivia Rockeman of Bloomberg News (WPNS).