U.S. Home Starts Reach Highest Level in a Year, Permits Rise

Updated on

A worker hammers a piece of lumber to a wall frame on a home under construction at the M/I Homes Inc. Bougainvillea Place housing development in Ellenton, Florida.

Photographer: Ty Wright/Bloomberg

U.S. new-home construction rebounded in October to the fastest pace in a year, partly reflecting recovery efforts in the hurricane-stricken South, government figures showed Friday. A pickup in permit applications for one- family dwellings indicates building will remain firm in coming months.

Highlights of Housing Starts (October)

  • Residential starts rose 13.7% to a 1.29 mln annualized rate (est. 1.19 mln) after upwardly revised 1.14 mln pace in prior month
  • Single-family home starts rose 5.3%; multifamily jumped 36.8%
  • Permits, a proxy for future construction of all types of homes, rose 5.9% to 1.3 mln rate (est. 1.25 mln) from a 1.23 mln pace

Key Takeaways

The report showed building permits for single-family homes improved in October to an 839,000 annualized pace, the fastest since September 2007. Construction spending, which subtracted from gross domestic product in the second and third quarters, may add to U.S. economic growth in the final three months of 2017 on the heels of rebuilding efforts.

New construction in the southern U.S. rose 17.2 percent, the most since January, including the biggest gain for single-family starts since July 2014. Areas in the South were hit particularly hard in September by hurricanes Harvey and Irma, which caused flooding and delayed beginning home construction. Activity typically rebounds in later months as rebuilding efforts begin in the affected regions.

A gauge of homebuilders’ confidence surged in November to an eight-month high, indicating optimism about the outlook amid sustained demand, boosted by the steady job market and relatively low mortgage costs.

At the same time, the industry is dealing with a shortage of workers, higher materials prices and difficulty finding ready- to-build lots. Economists expect residential construction will keep expanding gradually.

Other Details

  • Single-family home starts rose to a 877,000 rate, the fastest since February, from 833,000 the prior month
  • Groundbreaking on multifamily buildings, such as apartments and condominiums, climbed to an annual rate of 413,000; these monthly data typically experience large swings
  • Three of four regions posted gains in starts, while new construction declined in the West
  • Report shows wide margin of error, with a 90 percent chance that the October figure was between a 3.2 percent rise and 24.2 percent gain
  • Number of homes authorized but not yet started rose to 152,000 in October, most since June 2015
  • Houses under construction in October totaled 1.1 million, most in a decade; single-family properties most since July 2008
  • Report released jointly by the Census Bureau and Department of Housing and Urban Development in Washington

— With assistance by Kristy Scheuble

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