Implications:  After unusually cold weather and fires held back homebuilding in January, new home construction rebounded sharply in February, rising to a 1.501 million annual rate and topping even the most optimistic forecast from any economics group surveyed by Bloomberg.  The gain was broad-based with both single-family and multi-family increasing, and three out of four regions contributing. But despite the big jump, starts are still down 2.9% compared to a year ago, while permits for new builds are down 6.8%, and both have been hovering around levels reminiscent of 2019. It appears that part of the reason why homebuilding has lagged of late is due to builders focusing on completing projects.  Home completions declined 4.0% in February, but the 1.592 million annual pace was faster than any month from 2020-2023.  Moreover, completions have run above a 1.5 million pace (our estimation of annual homes needed to keep up with population growth and scrappage) in eleven out of the last twelve months.  With strong completion activity and tepid growth in starts, the total number of homes under construction has declined 14.8% in the past year.  That type of decline is usually associated with a housing bust, but we don’t see that happening.  With the brief exception of COVID, the US has consistently built too few homes almost every year since 2007.  As a result of the shortage of homes, we think housing is far from a bubble and expect housing prices to continue higher in 2025 in spite of some broader economic headwinds.  In other recent housing news, the NAHB Housing Index (a measure of homebuilder sentiment) dropped to 39 in March from 42 in February.  Keep in mind that a reading below 50 signals a greater number of builders view conditions as poor versus good.  On the trade front, import prices rose 0.4% in February while export prices rose 0.1%.  In the past year, import prices are up 2.0% while export prices are up 2.1%.

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