New construction of homes was up 9.3% this past month and on the rise for the first time since April 2010. Although new home construction is still at a record low, things are beginning to look up.
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New construction of houses rose in November to the highest annual rate since April 2010, with multi-family activity leading the monthly U.S. growth, according to data released Tuesday by the Commerce Department.
Housing starts jumped 9.3 percent last month to a seasonally adjusted rate of 685,000. Economists polled by MarketWatch had expected an annual rate of 635,000 starts for November.
“While this shows modest improvement, it is important to remember that the level of housing starts is still close to record lows and considerably below the historical pace of 1.5 million,” Bank of America Merrill Lynch analysts pointed out in a research note.
Starts for units in buildings with at least five units rose 32.2 percent in November, climbing to a rate of 230,000, the highest since September 2008. Meanwhile, starts of new single-family homes increased 2.3 percent to an annual rate of 447,000.
Building permits up
Meanwhile, building permits, a leading indicator of housing construction, rose 5.7 percent in November to a seasonally adjusted annual rate of 681,000, the highest annual rate since March 2010.
Building permits for single-family homes rose 1.6 percent on the month to a 435,000 rate. Many economists consider single-family permits the most important number in the government’s release.
In the past year, overall starts are up 24.3 percent. However, starts of single-family homes are down 1.5 percent for the year. Meanwhile, starts of units in buildings with at least five units have gained a record 180.5 percent, with the data going back to 1959.
The increasing demand for multifamily properties is due to a shift from homeownership to renting — a trend that Bank of America Merrill Lynch analysts say is likely to last for years.
“First, foreclosures will naturally transition many homeowners to renters. Second, it will be challenging for current renters to become homeowners given the drop in net worth and income. Third, we expect credit conditions to remain tight for some time,” according to the analysts.
Data released earlier this week showed that home-builder confidence hit a 19-month high in December, though it remains at historically low levels.
Analysts with housing-finance company Fannie Mae said U.S economic momentum is expected to slow entering 2012, with financial-market stress from Europe’s debt problems posing the top risk.
“It’s important to recognize that we’re ending 2011 on a stronger note than we’ve seen throughout the year. Unfortunately, however, our 2012 outlook is not as rosy as our forecast for the fourth quarter of 2011,” said Doug Duncan, Fannie Mae’s chief economist.