US DATA
February housing starts and building permits came in stronger than expected, with January's figures also revised upward - but the divergence between single family and multi-unit housing activity remains stark.
- Total Starts totalled 1,521k on an annualized basis (1,440k expected, 1,374k prior - revised up 43k). Permits came in at 1,518k (1,496k expected, 1,489k prior - revised up 19k). That meant Starts grew 5.9% Y/Y, with Permits +2.4% Y/Y, suggesting overall housing construction activity is picking up more broadly.
- Looking at the underlying data though, single family permits made up 1,031k of permits highest since May 2022 and the 13th consecutive monthly increase, with multi-units just 487k - a slight uptick from January but in a broader downtrend that started in mid-2022.
- Likewise, single-family starts came in at 1,129k - the highest since April 2022 - while multi-unit starts remained below the 400k mark for another month (392k), and well below late 2022/early 2023 levels.
- The divergence in the series continues to be explained by rising interest rates offsetting investor interest in multi-unit housing, while single-family activity is gaining as homeowners are unwilling to move and refinance lest they give up their low-rate fixed mortgages, pushing new home demand higher.
- While there is a disinflationary impact from multi-family supply coming online - 5+unit completions hit the highest since 1974 in February - resilience in real housing market activity in the face of tighter monetary policy will remain a confounding factor in the FOMC's thinking on the potential for rate cuts later this year.
Source: Census Bureau, MNI
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