February Housing Starts Rise Amid Cost Challenges

Land-based housing starts rose 11.4% in February, preventing low existing inventory, but builders are facing high costs and manpower shortages, the NAHB reported.

WASHINGTON – Existing limited inventory has helped the start of land-based home operations to raise solid profit in February, but builders are still facing high construction costs due to tariff problems and ongoing shortages related to construction and labor-related plots.

Total housing starts increased by 11.2 percent in February to a seasonally adjusted annual rate of 1.50 million units, according to a report by the U.S. Housing and Urban Development Office and the U.S. Census Bureau.

The February reading of 1.50 million starts is the number of housing-building starts if development continues at this rate for the next 12 months. Within this total number, ground-attached home beginnings rose 11.4% to a seasonally adjusted annual rate of 1.11 million, the highest rate since February 2024. The multi-family sector, which includes apartment buildings, grew by 10.7% to an annual rate of 393,000.

“While solid demand and lack of existing inventory provided a boost to ground-based tipping in February, our latest construction survey shows that builders are still concerned about affordable housing challenges, especially high financing and construction costs, as well as key building materials tariffs,” said Buddy Hughes, chairman of the National Association of Building Builders (NAHB) and developer of Lexington homes. North Carolina.

“Despite high interest rates and policy uncertainty, ongoing lean levels of land-based home inventory have helped boost production for families in February,” said Jing Fu, senior director, forecasts and analysis for NAHB. “NAHB expects that ground-based home starts will actually remain constant in 2025, because the prospect of a better regulatory business climate is offset by uncertainty at the tariff front, meanwhile, multi-family construction is expected to remain soft in early 2025 due to challenging financing conditions, before stabilizing in the second half of the year.”

On a regional basis to this day, land-attached home beginnings and multi-family homes combined were 4.7% lower in the northeast, 21.5% lower in the Midwest, 8.3% lower in the South and 20.2% lower in the West.

The total permits fell by 1.2% to an annual rate of 1.46 million units in February and fell by 6.8% compared to February 2024. The permits for individuals fell by 0.2% to 992,000 units and fell by 3.4% compared to the previous year. The multi-family permits fell by 3.1% to 464,000.

Looking at regional permit data on a one-year basis to date, permits were 30.1% lower in the northeast, 2.3% lower in the Midwest, 2.1% lower in the South and 12.5% lower in the West.

The number of homes built in February fell 6.7 percent from last year, to 640,000. In February, the number of housing units in construction rose by 0.3% to an annual rate of 772,000. This marks the first increase after 18 months of continuous declines, but it fell by 20% compared to last year.