Housing Starts in U.S. Increase to 19-Month High: EconomyTimothy R. Homan
Builders broke ground in November on more houses than at any time in the past 19 months, led by a surge in multifamily units, signaling the market is stabilizing heading into 2012.
Starts increased 9.3 percent to a 685,000 annual rate, exceeding the highest estimate of economists surveyed by Bloomberg News and the most since April 2010, Commerce Department figures showed today in Washington. Building permits, a proxy for future construction, also climbed to a more than one-year high.
Work on multifamily units like apartments and townhouses is growing as the rental market improves. Single-family-home construction may be starting to strengthen as lower home prices and borrowing costs near record lows draw in some buyers, even as builders face competition from existing houses as another wave of foreclosures throws more marked-down properties on the market.
“It’s a solid report,” said Brian Jones, a senior U.S. economist at Societe Generale in New York, who had the highest forecast in the Bloomberg survey. “For months we’ve been flagging the strength in multifamily construction, but now we’re starting to get signs that single-family is pulling itself off the canvas.”
Stocks rose as the housing data added to recent evidence the world’s largest economy is strengthening. The Standard & Poor’s 500 Index climbed 3 percent to 1,241.3 at the close in New York. Treasury securities fell, sending the yield on the benchmark 10-year note up to 1.92 percent from 1.81 percent late yesterday.
German business confidence unexpectedly rose in December for a second month as two economic institutes predicted Europe’s biggest economy will stave off the debt crisis and avoid a recession in 2012, other reports showed today.
Australia’s central bank said resource investment is also helping the economy ride out Europe’s sovereign-debt crisis. The Reserve Bank of Australia lowered borrowing costs Dec. 6 because of the “non-trivial possibility of a very sharp contraction” in Europe, according to minutes of the meeting released today.
Payrolls increased in 29 U.S. states in November, while the jobless rate declined in 43, a sign the labor market is recovering across much of the U.S., figures from the Labor Department also showed today. New York led the nation with a 29,500 gain in jobs, followed by Texas with 20,800. The biggest drop in unemployment was in Michigan, where the jobless rate fell 0.8 percentage point to 9.8 percent.
The median estimate of 79 economists surveyed by Bloomberg called for a gain in U.S. housing starts to a 635,000 rate from a previously reported 628,000. Projections ranged from 600,000 to 655,000. The Commerce Department revised the October reading down to 627,000.
The November results compare with last year’s overall tally of 587,000 starts, the second-fewest on record. Home construction totaled 554,000 units in 2009, the lowest since record-keeping began in 1959.
Permits increased to a 681,000 annual pace in November, the highest level since March 2010. They were projected to fall to a 635,000 rate from 644,000 the prior month, according to the survey median. Applications for the construction of single-family homes climbed 1.6 percent, and those for multifamily units jumped 14 percent.
New construction of single-family houses rose 2.3 percent from the prior month to a 447,000 annual rate, the most since June. The category is heading for a record low this year at around 423,000, about 10 percent less than in 2010, according to Bloomberg News calculations. The worst year so far in five decades of data was 2009, when 445,100 homes were started.
The industry is being buoyed by work on multifamily units, which surged 25 percent in November to an annual rate of 238,000, the highest level since September 2008. Apartments and other multifamily dwellings are gaining ground as foreclosures turn more Americans into renters.
“Multifamily construction is experiencing a mini boom as Americans shift from buying to renting,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “Homebuilders still compete with a glut of cheaply priced foreclosed homes, but their own inventory is nearing historic norms in relation to sales.”
Three of four regions had a November increase in starts, led by a 54 percent jump in the Northeast and a 23 percent gain in the West. Starts fell 18 percent in the Midwest.
Purchases of new houses rose 1.3 percent in October, as discounted prices lured in some buyers, Commerce Department figures show. Sales of previously owned homes, which now make up about 94 percent of the market, increased 1.4 percent that same month, according to the National Association of Realtors.
The Obama administration this month started a new version of the federal Home Affordable Refinance Program, or HARP, after the original program helped less than a quarter of the people targeted to lock in lower mortgage rates.
Federal Reserve policy makers reiterated at a meeting this month that they will keep the benchmark interest rate near zero until at least 2013. The central bank in September decided to reinvest maturing housing debt into new mortgage-backed securities instead of Treasuries.
Some policy efforts may be contributing to signs of improvement in the housing market. A report yesterday showed the National Association of Home Builders/Wells Fargo index of builder confidence rose in December for a third straight month, to 21, the highest level since May 2010. Readings below 50 mean more respondents said conditions were poor.
“November is a time that historically sales slow down,” Larry Sorsby, chief financial officer at Hovnanian Enterprises Inc., said in a Dec. 15 call with analysts. “And this year we’ve not seen as dramatic a slowdown as we have in recent prior years. The market feels a little bit better than we would have expected.”
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