Housing Starts Surged In February As Home Builders Ramped Up Construction

U.S. housing starts rebounded more than expected in February, hitting their highest level in five months, as builders ramped up the construction of single-family homes in a sign of confidence in the economy.

Groundbreaking increased 5.2 percent to a seasonally adjusted annual pace of 1.18 million units, the highest level since September, the Commerce Department said on Wednesday. January's starts were revised up to a 1.12 million-unit rate from the previously reported 1.099 million-unit pace.

Economists polled by Reuters had forecast housing starts rising to a 1.15 million-unit pace last month.

The rebound in groundbreaking activity could lift first-quarter gross domestic product growth estimates, which were cut on Tuesday following February's weak retail sales report. The housing sector is being supported by a firming labor market, which is encouraging young adults to leave their parents' homes.

The increase in household formation has largely benefited the multi-family segment of the housing market as many young adults have student debts and little savings to purchase a home.

Labor and land shortages, however, remain a challenge for builders, a survey showed on Tuesday.

Last month, groundbreaking on single-family housing projects, the largest segment of the market, surged 7.2 percent to an 822,000-unit pace, the highest since November 2007.

Single-family starts in the West rose to their highest level since September 2007. In the South, where most home building takes place, single-family starts were unchanged.

Single-family starts soared 18.6 percent in the Midwest. Groundbreaking on single-family housing projects tumbled 12.5 percent in the Northeast, likely as ground remained too wet after a major snowstorm in January.

Housing starts for the volatile multi-family segment rose 0.8 percent to a 356,000-unit pace.

Building permits fell 3.1 percent to a 1.17 million-unit rate last month. Permits for the construction of single-family homes rose 0.4 percent last month, while multi-family building permits dropped 8.4 percent.