U.S. housing starts likely to continue to rebound, firmer builder sentiment to stimulate new home sales

U.S. housing starts data for the month of February is set to release tomorrow. The announcement of the “pause” by the Fed in December spurred a 50 basis points drop in mortgage rates, which seems to have been just in time to stem the fall in residential activity, as housing starts rebounded 18.6 percent in January after the 14 percent fall in December.

The rise in single-family starts in January broke a string of four straight declines. With permits running 15 percent ahead of starts, a continued modest rebound is expected through the spring, noted Wells Fargo in a research report.

Easing of home price appreciation and firming mortgage applications and builder sentiment should stimulate new home sales.

“As a primary transmission mechanism for monetary policy, the housing market will be closely watched this spring for clues as to the efficacy—and sustainability—of the Fed’s new stance”, said Wells Fargo.

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