WASHINGTON (AP) — The number of homes under construction fell 8.7 percent in February, as ground breakings for single-family houses plunged to their lowest level in nearly two years.
The Commerce Department said that builders started construction at a seasonally adjusted annual rate of 1.16 million units last month, down from a 1.27 million pace in January. The setback stems from a 17 percent drop in the building of single-family houses, which posted the weakest pace since May 2017. Apartment construction increased in February.
Starts plummeted 29.5 percent in the Northeast. They declined by 6.8 percent in the South and 18.9 percent in the West. Home construction increased 26.8 percent in the Midwest, but the gains came entirely from apartment complexes.
Single-family housing starts are running 2.3 percent below last year’s pace. Lower mortgage rates at the start of 2019 appear to be boosting buyer demand for housing, but builders are contending with rising costs for labor and land that limit how much new construction can take place.
“The weakness in this month’s data may be a sign that builders continue to face problems with labor shortages and lot availability, even as we expect demand to pick up going into the spring buying season, fueled by lower mortgage rates,’’ said Joel Kan, associate vice president of economic and industry forecasting for the Mortgage Bankers Association. “Residential construction had dipped towards the end of 2018, and the January surge was thought to be a possible sign of a bounce back. Unfortunately, we are back down to November and December levels.’’
Housing permits, an indicator of future activity, fell 1.6 percent to an annual rate of 1.30 million.