Home building in the U.S. rose by almost 10% in February, buoyed by a growth in apartment construction as well as a small increase in single-family home starts.
This could signal two things: first, that renters might finally catch a break from the stratospheric pandemic-era rental prices as inventory increases and, second, that homebuyers are finally returning to the market.
Overall, housing starts in February increased 9.8% to 1.45 million units after six straight months of decline, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
That means builders would begin 1.45 million housing units if development kept this pace for the next 12 months. Single-family starts increased by 1% while the multifamily sector, which includes apartment buildings and condos, increased by 24% in February.
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Compared to February 2022, home building is down 18%, with single-family housing down 32%. Meanwhile, apartment construction was up 14% year over year.
The new apartments should bring some relief to the rental market where rents rose quickly during the pandemic.
In fact, there are signs it’s already happening.
Over the past two years, the U.S. median rent rose 18%, but new data suggests that the cost to rent an apartment nationwide may be moderating.
Rents in February were down nearly 5% from November 2022, with January marking the fifth consecutive month of year-over-year single-digit increases and the lowest yearly increase since June 2021, according to a report from Rent.com.
While rents rose 2.4% in January from a year earlier to $1,942, the national median was down about 2% from December.
Prices peaked in August 2022 at $2,053, after rising above $2,000 for the first time in May.
Builder confidence in the market for newly built single-family homes in February rose 7 points to 42, marking a second consecutive monthly gain, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released last month.
Rising builder confidence is signaling a turning point for home building later in 2023, said National Association of Home Builders Chief Economist Robert Dietz.
“Starts were up in February given a limited pullback for interest rates. We expect volatility in the months ahead as ongoing challenges related to construction material costs and availability continue to act as headwinds on the housing sector," said Dietz. "However, interest rates are expected to stabilize and move lower in the coming months, and this should lead to a sustained rebound for single-family starts in the latter part of 2023.”
On a regional basis compared to the previous month, combined single-family and multifamily starts were 16% lower in the Northeast, 70% higher in the Midwest, 2% higher in the South and 17% higher in the West.