New residential construction in the U.S. showed a substantial decrease in the month of February, according to a report released by the Commerce Department on Wednesday, with housing starts extending the sharp pullback seen in the previous month.
The report said housing starts plummeted by 10.3 percent to an annual rate of 1.421 million in February after slumping by 5.1 percent to a revised rate of 1.584 million in January.
Economists had expected housing starts to decrease by 0.9 percent to a rate of 1.565 million from the 1.580 million originally reported for the previous month.
With the steep drop, housing starts continued to give back ground after reaching a fourteen-year high of 1.670 million in December.
The sharp decline in housing starts came as single-family starts tumbled by 8.5 percent to a rate of 1.040 million, while multi-family starts dove by 15.0 percent to a rate of 381,000.
"The pace of starts was likely held down by severe weather, particularly in the South, which accounts for over half of all housing starts," said Nancy Vanden Houten, Lead Economist at Oxford Economics.
The report also showed a bigger than expected decrease in building permits, which plummeted by 10.8 percent to an annual rate of 1.682 million in February after spiking by 10.7 percent to a revised rate of 1.886 million in January.
Building permits, an indicator of future housing demand, had been expected to tumble by 7.0 percent to a rate of 1.750 million from the 1.881 million originally reported for the previous month.
The substantial decrease came after building permits reached their highest level since May of 2006 in the previous month.
Single-family permits slumped by 10.0 percent to a rate of 1.143 million, while multi-family permits plunged by 12.5 percent to a rate of 539,000.
"We expect the pace of housing starts to moderate in 2021 as homebuilders confront constraints including high lumber prices and shortages of lots and labor," said Vanden Houten. "However, we think the February data overstates any actual weakness in the housing market."
The National Association of Home Builders released a report on Tuesday showing a slightly bigger than expected decrease in U.S. homebuilder confidence in the month of March.
The report said the NAHB/Wells Fargo Housing Market Index fell to 82 in March after inching up to 84 in February. Economists had expected the index to edge down to 83.