US housing starts fall slightly in February

Unseasonably cold weather appears to have chilled new-home construction in February, but underlying figures suggest building could be poised for a spring rebound.

US housing starts decreased 0.2 per cent to a seasonally adjusted annual rate of 907,000, the Commerce Department said Tuesday. The slight drop comes after starts tumbled 11.2 per cent in January, though that month's pace was revised up from the previous estimate.

Building permits, a sign of future construction typically influenced less by weather, advanced 7.7 per cent to a seasonally adjusted annual rate of 1.02 million last month. That was the strongest pace since October.

Readings for both starts and permits were above expectations. Economists surveyed by Dow Jones had forecast a pace of 905,000 starts in February and 955,000 building permits.

In a positive sign, single-family starts rose 0.3 per cent in February. That was the first increase in the category since November.

New construction of multi-family properties, which tends to be more volatile, decreased 1.2 per cent last month.

While housing starts in February remained below December's pace of above 1 million units, the latest figure is stronger than readings last fall. Still, home building remains well below the 50-year historical average of 1.5 million starts per year.

Weather likely influenced the recent housing data. Unseasonably cold temperatures can prevent builders from breaking ground and depresses demand for homes by discouraging would-be buyers from shopping.

However, the housing market faces other headwinds, including elevated interest rates. A 30-year fixed-rate mortgage averaged 4.37 per cent last week, three-quarters of a percentage point above last year's mid-March level, according to Freddie Mac. Higher interest rates make buying a house less affordable for borrowers.

Builders also reported a shortage of skilled workers and available land in a National Association of Home Builders survey, released Monday. The industry group's builder confidence measure reflected poor market conditions for the second straight month in March.

The housing data comes as other elements of the economy began to thaw after a winter chill. Last month, the pace of hiring was the strongest since November and manufacturing output recorded the best gain since August. Consumers also stepped up spending at restaurants, clothing stores and car dealers in February.