Housing starts rebounded from their January drop with a strong upside surprise in February.  

Overall new-home construction, which includes single-family and multifamily units, jumped 11.2% from January to a seasonally adjusted annual rate of 1,563,000 units, the U.S. Census Bureau and the U.S. Department of Housing and Urban Development said.      

The consensus estimate was for an annual rate of 1,383,000 units. Despite the jump, housing starts were still down 2.9% year over year. 

By type, single-family homes were started at a rate of 1,108,000, which represents an 11.4% monthly gain but a 2.3% yearly decline. Multifamily residential starts jumped 12.1% from January to 370,000, which is 6.6% below the year-ago level.      

While the surge in new-home construction is a welcome sign for future homebuyers, it comes as builder sentiment continues to soften, First American Deputy Chief Economist Odeta Kushi said. 

“Builders face persistent supply-side and affordability challenges, from higher material costs to a shortage of skilled labor,” Kushi said. “Recent tariff actions could push costs even higher, with builders estimating an additional $9,200 per home. If tariffs persist, builders will have no choice but to pass on the costs to consumers, who are already struggling with housing affordability.”