U.S. new-home groundbreakings fell in February by the most in eight months on a drop in single-family homes, suggesting buyers and builders remain wary despite higher wages and a drop in mortgage rates.
Residential starts fell 8.7% to a 1.16 million annualized rate, below estimates, after an upwardly revised gain the prior month, according to government figures Tuesday. Permits, a proxy for future construction, fell 1.6% to a 1.3 million rate.
The steeper-than-expected drop — which may partially reflect cooler weather in February — signals developers continue to struggle to build affordable properties amid rising costs for materials and labor. Even so, sales have started to bounce back from last year’s slump amid lower mortgage rates and faster pay gains.
Some reports have indicated a pickup in housing in the first quarter, with existing home sales — which account for about 90 percent of the market — soaring in February by the most since 2015 and homebuilder sentiment increasing this year. Other reports on the industry may be more mixed.
Single-family starts slumped the most in four years while permits were unchanged. Starts for multifamily homes, a category that tends to be volatile and includes apartment buildings and condominiums, jumped 17.8% as permits fell 4.2%. Three of four regions posted declines, led by a 30% drop in the Northeast, where single-family starts dropped the most in four years.
The West also declined as the single- family category saw the steepest drop in a decade. About 195,000 homes were authorized but not yet started in February, little changed from the prior month.
