Investing.com - U.S. homebuilding slowed in February after a surge at the beginning of the year, dashing hopes that the Federal Reserve’s pause in interest rate hikes would immediately breathe new life into the real estate sector.
Housing starts tumbled 8.7% to a seasonally-adjusted annual rate of 1.162 million units last month, the Commerce Department said, well below a consensus forecast for 1.213 million units.
New construction data have been volatile in recent months. They flattened out at the end of last year after a long expansion that goes all the way back to 2010, then rebounded sharply in January before snapping back again last month.
Building permits, a key indicator of demand in the real estate market, also came in below consensus at 1.296 million units, the Commerce Department said. Analysts had forecast 1.32 million.
The data suggest the market may need more time to respond to the Federal Reserve's shift to a looser monetary policy stance. Although Fed officials had signaled in February they would wait before hiking interest rates further, it was only this month that updated models showed it no longer expects to raise rates at all this year.
The Fed's shift has effectively put a cap on mortgage rates and, coupled with signs of solid earnings growth, has spurred expectations that people will be able to tackle the cost of purchasing homes. Data released last Friday showed the largest gain in existing-home sales stateside since December 2015 thanks to lower mortgage rates, more inventory, higher income levels and improved consumer confidence.
Sentiment among U.S. homebuilders held steady in March, sustaining a rebound from a recent three-year low on improvement in sales and a brighter outlook for the next six months, according to a survey by the National Association of Home Builders released last week.