U.S. housing starts declined in February, returning to a long-term trend of modest improvement in single-family construction and a slowdown in apartment building.
Total housing starts fell 7% in February from the previous month to a seasonally adjusted annual rate of 1.236 million, the Commerce Department said Friday.
Multifamily construction plummeted 26.1% in February, after activity in this segment increased robustly in January. Single-family starts, meanwhile, rose 2.9% compared with a month earlier.
"This was really a story about the fact that we're seeing a return to...a gradual, modest growth trend" on the single-family side, said Robert Dietz , chief economist of the National Association of Home Builders .
Residential building permits, which can signal how much construction is in the pipeline, declined 5.7% to an annual pace of 1.298 million last month.
Housing-starts data are volatile from month to month and can be subject to large revisions. Friday's 7% fall for starts came with a margin of error of 16.7 percentage points.
The long-term trend has been one of modest improvement in single-family building and declines in multifamily construction.
Year-to-date housing starts are up 3.5% compared with the same period last year. Single-family starts rose 7.8% during that period and starts for buildings with five or more units were down 5.8%.
Americans have been shifting back toward owning after a decadelong trend favoring renting. The homeownership rate rose in 2017 for the first time since 2004.
Meanwhile, even as demand for multifamily housing has tapered, there is a glut of high-end apartments in urban centers. Together, these trends have prompted many builders to pull back on multifamily construction while single-family builders are gradually ramping up production, although they still face stiff headwinds.
Mr. Dietz said he is predicting only a 5% increase in single-family starts this year and a slight decline in multifamily starts, due in part to the tax bill that is expected to cause a slowdown in higher-cost housing markets. Material shortages and a lack of construction workers are major challenges for builders as they try to build more homes.
Softwood lumber prices have risen 60% since the beginning of 2016, Mr. Dietz said.
Single-family home building has held near the highest levels since before the recession began, although it remains significantly below normal levels when adjusting for population.
A bright spot for home buyers is that housing completions were up some 7.8% in February compared with a month earlier. That could help ease some of the shortage of homes for sale during the critical spring selling season, although many of those homes are already sold.
"At the end of the day, it's the completed home that is the addition to the housing stock that is so desperately needed to relieve our supply problems this spring selling season," said Mark Fleming , chief economist at First American Financial Corp. , a title insurance company.
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