It’s the first day of spring, and judging by February’s permit activity, builders are ready for the thaw.
Permits for privately owned housing units were up 5.1% in February on a monthly basis and were 34.3% higher year-over-year, reaching a seasonally adjusted annual rate of 717,000, according to data released today by the U.S. Census Bureau. The rate is the highest seen in more than three years.
Single-family permits were up 4.9% to an annual rate of 472,000. Among multifamily projects, permits for buildings with five units or more were up 3.3% to a rate of 219,000, and permits for buildings with two to four units were up 30% to an annual rate of 26,000.
However—just as this month’s Housing Market Index reported builders’ confidence in the future rising while sentiment about current conditions was down—the Census Bureau reports that as builders were pulling more permits for future projects, housing starts moved lower.
Overall, starts were down by 1.1% for the month to a seasonally adjusted annual rate of 698,000, although the number was still 34.7% higher year-over-year. The monthly decline came from the single-family sector, which was down 9.9% from January but up 17.8% from February 2011. Multifamily starts on buildings with five or more units were up 28.7% and 108.0% on a monthly and yearly basis, respectively.
However, single-family’s decline in activity is likely related to weather, as conditions were milder in January than February, wrote Patrick Newport, U.S. economist at IHS Global Insight, in an email to Builder today. Newport also pointed to the decline’s margin of error: plus or minus 15.9%. "The drop could just be statistical noise," he wrote.
While noting that the housing market is still depressed, Newport expects this year to be better than last. IHS estimates that single-family starts will rise to 487,000 in 2012, compared to 434,000 last year; and that multifamily starts will jump by almost 50% to 258,000 from 177,000 in 2011.
Much of the improvement could be coming from young adults forming households after spending a few years living at home, Newport says. He referenced a Pew Research Center report released last week that stated that more than 75% of young adults between ages 25 to 34 who moved in with their families during the economic turmoil of the Great Recession are now feeling good about their financial future. "This group may be behind the pickup in demand," Newport wrote. "They are finding jobs and heading out on their own."
Claire Easley is a senior editor at Builder.
Learn more about markets featured in this article: Greenville, SC.