• US housing starts rose 10.8% month-over-month in March, far exceeding the expected decline of 0.4%.
  • Building permits fell 10.8% month-over-month, missing estimates of a 0.3% drop, signaling caution on future supply.
  • The split between starts and permits highlights ongoing builder focus on completing existing projects amid high mortgage rates.

Groundbreakings Up, Approvals Down

US housing starts surged 10.8% in March compared to February, reaching an annualized rate of 1.55 million units, according to data released Thursday by the Census Bureau. The figure sharply beat the consensus estimate for a 0.4% decline, catching many economists off guard. Meanwhile, building permits—a forward-looking indicator—dropped 10.8% to an annualized rate of 1.47 million units, significantly worse than the anticipated 0.3% fall.

The divergence suggests builders are racing to start projects already in the pipeline but pulling back on new approvals as elevated mortgage rates and still-high construction costs weigh on their outlook. "The jump in starts is likely driven by a catch-up from weather-related delays earlier in the year, but the permit data implies a more cautious tone going forward," said a senior economist at a major bank, who asked not to be named discussing preliminary data. Bloomber reached out to the National Association of Home Builders for comment but did not receive an immediate response.

Volatility Masks Underlying Trends

Monthly housing data is notoriously volatile, especially in early spring when seasonal adjustments can swing readings. The March figures follow a revised 1.1% decline in starts for February. The 10.8% permit drop is the steepest month-over-month since April 2020, when the pandemic shut down much of the economy. However, permits remain above levels seen in late 2023, indicating that the pullback may be temporary.

The mixed signals come as the Federal Reserve keeps interest rates elevated to combat inflation, pushing average 30-year fixed mortgage rates above 7%. Builders have responded by offering rate buydowns and other incentives to move inventory, which may have boosted starts in the short term. "Without a deal on rates, we'd likely see permits fall further," noted one industry consultant.

Regional Breakdown and Outlook

Regionally, the South saw the largest gains in starts, up 12.5%, while the Northeast posted a modest increase. Permits fell across all four regions, with the Midwest dropping 14.2%. The multifamily segment drove much of the starts surge, while single-family permits held relatively steadier.

Analysts will be watching the April data for signs of stabilization. If the permit weakness persists, it could temper housing completions later this year, adding to inventory constraints that have kept home prices high. For now, the market remains in a tug-of-war between builder optimism on current demand and anxiety over future financing costs.

This article was updated at 11:30 AM ET to include additional regional data. A previous version misstated the February starts revision; it was a 1.1% decline, not an increase.