U.S. homebuilding rebounded sharply in February as the drag from cold weather eased, and while permits fell, they remained at higher levels, suggesting an acute shortage of houses will continue to underpin residential construction even as mortgage rates rise.

Housing starts jumped 6.8% to a seasonally adjusted annual rate of 1.769 million units last month, the Commerce Department said on Thursday. Data for January was revised higher to a rate of 1.657 million units from the previously reported 1.638 million units. Economists polled by Reuters had forecast starts increasing to a rate of 1.690 million units.

Permits for future homebuilding fell 1.9% to a rate of 1.859 million units. They increased in January to levels not seen since May 2006.

Despite mortgage rates rising as the Federal Reserve tightens monetary policy to fight high inflation, homebuilding is likely to remain supported by a dearth of homes available for sale. The U.S. central bank on Wednesday raised its policy interest rate by 25 basis points, the first hike in more than three years. The Fed also laid out an aggressive plan to push borrowing costs to restrictive levels by 2023. 

There is a huge backlog of houses approved for construction that are yet to be started as builders struggle with shortages and very expensive materials. The National Association of Homebuilders said on Wednesday its measure of single-family homebuilders confidence fell to a six-month low in March. Its gauge of future sales was the lowest since June 2020.

Keep reading on Reuters.com