U.S. single-family housing starts, building permits rebound in February

© Reuters. FILE PHOTO: A house under construction is seen in Los Angeles, California, U.S., June 22, 2022. REUTERS/Lucy Nicholson

WASHINGTON (Reuters) - U.S. single-family homebuilding and permits for future construction rebounded in February, offering hope that the housing market was probably stabilizing after being hammered by higher mortgage rates.

Single-family housing starts, which account for the bulk of homebuilding, increased 1.1% to a seasonally adjusted annual rate of 830,000 units last month, the Commerce Department said on Thursday. Data for January was revised down to show single-family homebuilding falling to a rate of 821,000 units instead of the previously reported 841,000 unit-pace.

Single-family homebuilding increased in the Northeast and West, but tumbled in the densely populated South as well as the Midwest. Single-family housing starts dropped 31.6% on a year-on-year basis in February.

The housing market has been choked by the Federal Reserve's most aggressive interest rate hiking cycle since the 1980s to tame inflation. But the worst of the housing market downturn could be over. A survey on Wednesday showed the National Association of Home Builders/Wells Fargo Housing Market Index increased for a third straight month in March, though homebuilder sentiment remains depressed.

Mortgage rates, which had resumed their upward trend, could start falling as U.S. Treasury yields have declined sharply after the recent collapse of two regional banks sparked fears of contagion in the banking sector. Some economists believe financial market instability could make it harder for the Fed to continue raising rates next week.

Starts for housing projects with five units or more shot up 24.1% to a rate of 608,000 units, the highest level since last April. Multi-family housing construction remains underpinned by demand for rental accommodation.

With both single- and multi-family homebuilding rising, overall housing starts surged 9.8% to a rate of 1.450 million units last month, the highest level since September. Economists polled by Reuters had forecast starts rising to a rate of 1.310 million units in February. Starts dropped 18.4% on a year-on-year basis in February.

Single-family building permits increased 7.6% to a rate of 777,000 units. They had declined for 11 straight months.

Permits for housing projects with five units or more jumped 24.3% to a rate of 700,000 units. Overall, building permits vaulted 13.8% to a rate of 1.524 million units.

The number of houses approved for construction that are yet to be started was unchanged at 294,000 units.

The single-family homebuilding backlog fell 3.0% to 130,000 units, but the completions rate for this segment increased 1.0% to a rate of 1.037 million units. The inventory of single-family housing under construction fell 1.7% to a rate of 734,000 units.