U.S. home construction jumps 6.8% in February

U.S. home construction rebounded in February to the strongest pace since 2006, suggesting builders had greater success navigating material and labor constraints in the month.

Residential starts increased 6.8% last month to a 1.77 million annualized rate, according to government data released Thursday. Applications to build, a proxy for future construction, eased to an annualized 1.86 million units, though remained elevated.

The median estimate in a Bloomberg survey of economists called for a 1.7 million pace of housing starts in February.

The data point to a pickup in construction activity after weather and omicron-related worker absences tempered building in January. Still, builders are struggling to meet buyer demand in the face of snarled supply chains, high commodities prices and an ongoing struggle to attract skilled labor.

Looking ahead, Russia's invasion of Ukraine has roiled global supply chains and led to a surge in commodities prices. Data out Wednesday showed U.S. homebuilder confidence fell to a six-month low in March, as the outlook for sales dropped to the lowest since June 2020.

Single-family starts advanced 5.7% in February to an annualized pace of 1.22 million units. Multifamily starts, which include apartment buildings and condominiums, increased to 554,000, the strongest pace since January 2020.

Inflation -- now growing at the fastest rate in 40 years -- is eroding affordability. The Federal Reserve increased interest rates for the first time since 2018 on Wednesday, and is poised to implement several more rate increases this year. A direct result will be an increase in mortgage rates, which already sit at the highest level in nearly three years.

Still, the labor market remains strong. A separate report out Thursday showed applications for unemployment benefits fell by 15,000 to 214,000 last week, the lowest level this year.

The number of homes authorized for construction but not yet started was little changed in February at the highest level since 1974, suggesting a robust pipeline for builders in the months ahead. The number of single-family houses under construction continued to rise, now at the highest level since late 2006.

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