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New US home construction rebounds in February

Construction of new US housing rebounded in February to its highest level in four months, the Commerce Department reported on Thursday.

WASHINGTON: Construction of new US housing rebounded in February to its highest level in four months, the Commerce Department reported on Thursday (Mar 16).

And construction starts on single-family homes jumped to the highest level in nearly 10 years, adding supply to ease the strong demand for houses.

Construction may have been helped by the unseasonably warm month of February, as total housing starts rose three percent to a seasonally-adjusted annual rate of 1.29 million units, its highest level since October.

The result was in line with analyst forecasts and 6.2 per cent above the same month last year.

Single-family units posted a second month of strong starts, jumping 6.5 per cent to 872,000 new units, a level not surpassed since October 2007.

However, starts on multi-family dwellings with more than five units went the other way, falling 7.7 per cent to 396,000.

"Homebuyers should be pleased with today's new construction numbers," Ralph McLaughlin, chief economist at Trulia, said in a research note.

"This means a healthy dose of new homes will be available this spring in an otherwise inventory-constrained market."

However, the number of permits for new housing construction fell 6.2 per cent to an annual rate of 1.21 million, driven by a 26.9 per cent monthly drop in authorisations for buildings of five or more units, which could indicate falling supply ahead.

Kristin Reynolds of IHS Markit said building permits are not affected by weather conditions and therefore are a more accurate indicator than housing starts. "Building permits in February retreated in all areas except the Mid-West," she said.

With analysts saying many young people may be preparing to leave their parents' homes in the current economic recovery, but still reticent to take on mortgages to buy a home, builders have favored the construction of multi-unit buildings to serve the rental market, leaving a tight supply of houses.

Despite the monthly decline in construction starts for multi-family buildings, it was still up 11.2 per cent over the February of last year.

Ian Shepherdson of Pantheon Macroeconomics said the pop in single-family starts was likely due to the unseasonably warm weather and could revert to trend in March, "or worse," but are still rising.

"Stepping back from the short-term noise, the key point here is the trends in single-family starts and permits rose sharply last fall, before the election, and the gains have been held," Shepherdson wrote in a client note.