The U.S. Commerce Department reported that housing starts rose 22% in February to a seasonally adjusted annual rate of 583,000. The last time housing starts increased was in June, and this was the largest percentage increase in 19 years.
The increase was driven primarily to starts in multifamily units, which were up 80%, while single family unit starts rose by a more modest 1.1%
This is a pleasant surprise to economists, who expected housing starts to decline once again.
“With new home sales still falling and the month’s supply at a record, there is no reason for homebuilding to rise,” said Ian Sheperdson, chief U.S. economist at High Frequency Economics. “This is a temporary rebound, not a recovery.”
Last month the Commerce Department reported that housing in this country fell 16.8% in January to a seasonably adjusted annual rate of 466,000, the lowest level since 1945.
According to the report about January, housing starts were down 56% from what they were the previous January and had dropped 79% in the past three years.
“Eventually the extraordinary level of new homebuilding should help get inventories of unsold homes under control,” wrote David Greenlaw and Ted Wieseman, who are Morgan Stanley economists. “For now, the drop in new construction is being overwhelmed by the flood of fire-sale-priced foreclosed homes and short sales hitting the market, so foreclosure mitigation efforts will also be the key to the inventory situation.”