February Freeze Puts Home Building on Ice… Housing Starts and Permits Drop

The tight inventory situation in residential housing is about to get a little bit worse.

U.S. homebuilding dropped to a six-month low in February as severe cold gripped many parts of the country, in a setback for a housing market that remains supported by extremely lean inventories amid strong demand for larger homes.

Housing starts fell 10.3% to a seasonally adjusted annual rate of 1.421 million units last month, the lowest level since last August, the Commerce Department said on Wednesday. Economists polled by Reuters had forecast starts would decrease to a rate of 1.560 million units in February.

The deep freeze, which was most severe in Texas and other parts of the densely populated South region in the second half of February, dented retail sales and output at factories.

Housing starts fell in the Northeast, Midwest and South, but increased in the West.

Permits for future home construction tumbled 10.8% to a rate of 1.682 million units last month.

Supply disruptions because of coronavirus-related restrictions are driving up commodity prices, including softwood lumber, which surged a record 79.7% in February on a year-on-year basis. According to a survey from the Associated General Contractors of America, manufacturers have hiked drywall prices by 20% effective late March or the beginning of April.

Single-family homebuilding, the largest share of the housing market, declined 8.5% to a seasonally adjusted annual rate of 1.040 million units in February, also a six-month low. Single-family building permits tumbled 10.0% to a rate of 1.143 million units in February.

Starts for the volatile multi-family segment plunged 15.0% to a pace of 381,000 units. Building permits for multi-family housing projects declined 12.5% to a pace of 539,000 units.

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