Building Permits Increase as U.S. Housing Rebounds: Economy
The number of building applications issued in November rose to a four-year high, a sign the U.S. housing-market recovery will extend into 2013.
Permits, a proxy for future construction, climbed 3.6 percent to an 899,000 annual rate, the most since July 2008 and exceeding the 875,000 median forecast of 58 economists surveyed by Bloomberg, Commerce Department figures showed today in Washington. While housing starts fell 3 percent to an 861,000 pace, the average rate from September through November was the strongest since the three months ended August 2008.
Record-low mortgage rates and an improving job market are giving Americans the confidence and wherewithal to buy a house, boosting builders such as Toll Brothers Inc. (TOL), which are now able to raise prices. Gains in housing will help shore up economic growth this quarter as businesses curb spending on concern lawmakers will fail to avert the tax increases and spending cuts slated to take effect in 2013.
“We’re headed higher and next year is going to be the best year for housing starts that we’ve seen since 2007,” said Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh, who projected starts would drop to an 865,000 pace. “Housing is coming back.”
Stocks fell as deteriorating federal budget negotiations fueled concern that automatic tax increases and spending cuts will be triggered next year. The Standard & Poor’s 500 Index dropped 0.8 percent to 1,435.81 at the close in New York.
Elsewhere today, the World Bank said growth in East Asia’s emerging nations will accelerate next year as China’s economy recovers, reducing the need for policy makers to cut interest rates. The region is expected to account for about 40 percent of global growth in 2012, it said.
Estimates for the November reading on U.S. building permits in the Bloomberg survey ranged from 850,000 to 950,000.
The Commerce Department revised October housing starts down to an 888,000 rate from a previously reported 894,000 pace. So far this year, they are up 27.1 percent compared with the first 11 months of 2011.
Construction of single-family houses fell 4.1 percent to a 565,000 rate, matching the pace of permits for the month. Work on multifamily homes, such as apartment buildings, dropped 1 percent to an annual rate of 296,000. Applications for future multifamily projects jumped 10.6 percent in November to a 334,000 annual rate.
Two of four regions showed a decrease in starts last month, led by a 19.2 percent drop in the West. The Northeast region saw a 5.2 percent decrease, while the Midwest climbed 3.3 percent and the South rose 2.9 percent.
Confidence among homebuilders climbed in December for the eighth straight month, reaching its highest level in more than six years, the National Association of Home Builders/Wells Fargo reported yesterday.
The number of job openings at construction firms jumped to 130,000 in October, up 59 percent from the prior month and the most since May 2008, Labor Department data showed earlier this month. Each new home usually equates to full employment for three people for a year, according to Robert Dietz, an economist at the National Association of Home Builders in Washington.
Other related businesses are also seeing a pickup. Billings by architecture firms increased in November at the fastest pace in five years, a report from the American Institute of Architects showed today. The group’s billings index climbed to 53.2 last month, the highest level since November 2007, from 52.8 in October. Readings above 50 signal an increase in activity. The gauge has advanced for six consecutive months, the longest winning streak in its 17-year history.
The strength is also feeding into commodity markets. Lumber futures yesterday rose to a six-year high, extending a 2012 rally that is one of the biggest among commodities. Prices have surged 37 percent this year, more than any of the 24 commodities tracked by the Standard & Poor’s GSCI Spot Index.
Construction is aiding the economic expansion as the Federal Reserve continues its unprecedented asset-purchase program and holds rates to historic lows. For those who can qualify, declining mortgage costs are making it cheaper to buy a house.
The average rate on a 30-year, fixed loan was 3.32 percent last week, compared to 3.94 percent a year ago, according to Freddie Mac. The rate reached 3.31 percent in late November, the lowest in weekly data back to 1972.
Toll Brothers, based in Horsham, Pennsylvania, plans to open 77 new communities in fiscal year 2013 as sales and prices rise, Chairman Robert I. Toll said.
“There is hardly anyone who owns a home, lives in a home, or thinking of buying a home that doesn’t understand that home prices have gone up a decent amount in this past year,” Toll said on a Dec. 4 earnings call. “You take a $500,000 house, you’re up $20,000, $18,000. It’s not chicken feed. And I think that reverberating back through the populace that’s interested in new homes, motivates, and inspires additional demand. And with additional demand, you will get additional prices.”
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