Surge in Housing Starts Signals Improving Market
Housing starts surged in November to their highest since April 2010, led by a three-year high in multifamily units, offering hope for the weak housing market.
The Commerce Department announced on Tuesday that housing starts last month jumped 9.3 percent to a seasonally adjusted annual rate of 685,000 units. October’s starts were revised down to a 627,000-unit pace from a previously reported 628,000.
Residential construction was up 24.3 percent in November, compared to the same month last year, while building permits, a proxy for future construction, were also up to their highest level since March 2010. Applications for the construction of single-family homes climbed 1.6 percent, and permits for multifamily units jumped 14 percent.
Construction on multifamily units like apartments and townhouses is surging as the rental market improves. Lower home prices and borrowing costs have also strengthened construction on single-family units, even as builders face competition from existing houses as another wave of foreclosures throws more marked-down properties on the market.
New construction of single-family houses rose 2.3 percent last month to a 447,000 annual rate, the most since June. Work on multifamily homes surged 25 percent to an annual rate of 238,000, the highest level since September 2008.
Recent gains in homebuilding have been led by gains in construction on apartments and other multifamily dwellings as foreclosures turned more Americans from buyers into renters.
Three of the four regions measured by the Commerce Department showed 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.
Sales have also gotten a boost in recent months, with purchases of new homes up 1.3 percent in October as discounted prices lured in buyers, Commerce Department figures show. Sales of previously owned homes, which now make up about 94 percent of the market, increased 1.4 percent in October, according to the National Association of Realtors.
“November is a time that historically sales slow down,” Larry Sorsby, chief financial officer at Hovnanian Enterprises Inc., said in a December 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.”
It could be that the Federal Reserve’s efforts to stimulate growth in the housing market are beginning to have their intended effect. In a meeting this month, Fed policymakers reiterated that they will keep the benchmark interest rate near zero until at least 2013. In September, the central bank decided to reinvest maturing housing debt into new mortgage-backed securities instead of Treasuries.
The Obama administration may further contribute to the market’s improvement, this month introducing 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 secure lower mortgage rates.