Housing Starts, Permits Hit 1.5-Year High In November

WASHINGTON - Housing starts and permits for future construction jumped to a 1-1/2 year high in November as demand for rental apartments rose, suggesting the housing market was starting to recover.

The Commerce Department said on Tuesday housing starts surged 9.3 percent to a seasonally adjusted annual rate of 685,000 units, the highest since April last year.

Economists polled by Reuters had forecast housing starts rising to a 635,000-unit rate. Compared to November last year, residential construction was up 24.3 percent.

"It is positive for the housing market, which is picking up from rather subdued levels. Demand is coming off the lows, so that is healthy," said Sean Incremona, an economist at 4CAST in New York.

U.S. Treasury debt prices briefly extended losses on the data, while the dollar fell against the euro. U.S. stock index futures held their gains.

Although the overall housing market remains weak, rising demand for rental apartments is boosting the construction of multifamily homes.

Falling house values and stringent lending practices by banks are pushing Americans away from homeownership.

Housing is becoming less of a drag on the economy and residential construction has now grown for two straight quarters.

Even home builders are adopting a more optimistic view of the sector, with confidence rising to a 1-1/2 year high in December.

But a full recovery for the sector, which was one of the main triggers of the 2007-09 recession, remains far off in the future given a glut of unsold homes, weak prices, high unemployment and tight credit.

Housing starts are still less than a third of their 2.273 million rate peak in January 2006.

Last month, housing starts for the volatile multi-family homes segment surged 25.3 percent to a 238,000-unit rate, and groundbreaking for projects with five or more units hit the highest level since September 2008.

Single-family home construction -- which accounts for a large portion of the market -- rose 2.3 percent to a 447,000-unit pace.

New building permits unexpectedly increased 5.7 percent to a 681,000-unit pace in November. Economists had expected overall building permits to fall to a 635,000-unit pace last month.

Permits were pushed up by a 13.9 percent jump in the multi-family segment. Permits for buildings with five or more units were the highest since October 2008. Permits to build single-family homes rose 1.6 percent.

New home completions dropped 5.6 percent to 542,000 units last month.

(Reporting By Lucia Mutikani; Additional reporting by Chris Reese in New York; Editing by Andrea Ricci)

Copyright 2011 Thomson Reuters. Click for Restrictions.

Comments

[Mf1972]

04:07 PM on 12/22/2011

Isn't it odd that none of these republican debates are focusing on the elephant in the room issue? Is it me or are they purposely not asking what there positions are on house prices is because the answer (correctly) is let it fall and let the market sort it out? If they gave that answer they would be killed in the general election.....so they don't bring it up yet. My feeling is that they will let it collapse for 14 more months blame Obama (fairly or unfairly) and then fix it if they win.

[Y2KCockroach]

07:54 PM on 12/20/2011

It seems to me that an "uptick" in the rental housing market is hardly indicative of improving prospects for the housing market generally. People are interested in rentals because they simply (still) cannot afford to purchase a home.

Falling house prices will not help (although that might continue to happen). What will help is improving incomes, and increased levels of employment which in turn helps make housing more affordable (hard to buy a home when you don't have a steady, well-paying job). House construction is a huge part of the economy. Accordingly, this economy will only improve when the current housing glut works its way through the market, and there is legitimate demand for new homes.

If interest rates rise (and they very likely will) the housing market will take even longer to recover.

Builders are going to need to adjust to a changing demand, whenever this market recovers. Vehicle-dependent, monster homes in the ever-sprawling suburbs are very likely a thing of the past. The next generation will want energy efficient homes, smaller and more efficient floor plans, and high density town homes. There will likely be a permanent shift toward more urban-friendly (as opposed to suburban) neighborhoods.

All things considered, it is going to take a lot to work through the housing mess; but when it happens things are going to look different...

[kenhamlett]

04:11 PM on 12/20/2011

Unfortunately, the housing crisis will be with us for a few more years, since the inventory of problem homes is still at an unsustainable number. The most puzzling and frustrating political reality of recent years has been the unwillingness of either party's leaders to tackle this problem.

[Collapsing House Price]

05:21 PM on 12/20/2011

Yep. There are 25 MILLION excess empty housing units in the US today. Until prices fall to early 1990's levels, this debacle will continue.

[Kahill]

03:37 PM on 12/20/2011

"..housing market was starting to recover"
More wishful thinking, probably from builders and realtors! Right now the housing market is in lock-step with economy, or more correctly consumer's confidence in the economy, and there are really no reliable indicators that this is going to recover any time soon. Maybe five years from now, if we are lucky....

[Collapsing House Price]

02:18 PM on 12/20/2011

Builders are building and selling brand new housing for much less than the asking price of a resale house

Why buy a resale house when you can buy a new one for substantially less?

[larueskee]

04:03 PM on 12/20/2011

That is not reality. Construction materials, transportation, and labor have not gone down in relationship to resale homes price drops. New construction will be higher due to those costs and resales will be lower per square foot. If anything inventory of decent homes has declined finally to afford some building for customers who don't want the picked over homes of foreclosure.

[Collapsing House Price]

04:09 PM on 12/20/2011

False.

Our labor costs have been falling for for 17 years now and they're still falling.

Div3 materials are down 30%+ from peak.
Div 6 materials are down 25%.
Div 7 materials are down 40% at a minimu.

Are you in the construction biz too?

[drkazmd65]

01:12 PM on 12/20/2011

Who's buying a new built home in this buying climate?

With a glut of existing housing to be potentially had at a fire-sale price - why buy a new one?

[Collapsing House Price]

02:06 PM on 12/20/2011

Good point.

Why buy a house today when you can buy one later for 65% less?

[Steve Rockett]

12:46 PM on 12/20/2011

Wonderful news, especially in winter.

[Collapsing House Price]

12:10 PM on 12/20/2011

These aren't sales.

This is adding additional inventory to an already massive inventory of 25 MILLION excess empty houses.

Prices are falling falling falling. And that is a good thing.

[munki]

11:55 AM on 12/20/2011

"Single-family home construction -- which accounts for a large portion of the market -- rose 2.3 percent to a 447,000-unit pace" and multi-family as well... normally, it is heading to the right direction... I am seeing homes being built near Henderson/Silverado Ranch areas of Las Vegas (southern part of LV) closer to freeway heading back to Los Angeles...and it is selling.

My friend, who is a realtor in LV said... she is busy, busy and busy... reminds her of the boom. We noted buyers are not locals, but from all over N. America, overseas... Hmmm... bidding wars are going on in certain areas of LV - but not Paradise Metropolitan areas with high-rises, high HOA and small units. Buy at bargain, but monthly costs will be VERY high...

Well, some areas of LA is still struggling... too EXPENSIVE!

[Collapsing House Price]

02:18 PM on 12/20/2011

Imagine how large the collapse will be when that feedy frenzy is over. It will be stunning.

[munki]

02:51 PM on 12/20/2011

It did since late 2008 so... for 50-70% depending on the area.
But, let's ask you...where could you find a place where people from all over the world gathers for convention, party, or just for fun. A small city with entertainment that is of the big city, if not more... Many are buying with CASH...

[drbob601]

03:38 PM on 12/20/2011

Seems like it's almost all "investor"-buying happening in LV. No surprise, since house values have absolutely tanked in that particular area. Lots of CA residents are among the buyers in LV. foreigners, not so much.

The numbers in this article suggest most of the money (and optimism) is coming from these "investors" - for the potential rental income they can earn. Again, not surprising. With interest rates very low, and not many safe places to park cash and achieve a decent return, why not buy a cheap house - or even build a multi-family residence - and achieve a reasonable cash flow? Especially if you can borrow at 4% to finance it (with a good credit score).

I don't see much in this latest report to suggest that single-family housing is getting much of a bid. The folks with money seem to be betting on RENTALS being the hot market for the next several years at least...and I can't say I disagree with them on this point.

http://www.doctorhousingbubble.com/las-vegas-looks-to-california-for-home-sales-demand-1-out-of-3-vegas-home-buys-from-california/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+DrHousingBubble-HowILearnedToLoveSocal+%28Dr.+Housing+Bubble+-+How+I+learned+to+Love+SoCal%29

[ImmanuelGoldstein]

11:52 AM on 12/20/2011

God, I am sooo tired of explaining the fallacy of the shifting base number that I don't know what to do!

[Kenz300]

11:45 AM on 12/20/2011

We are slowly crawling out of the this mess.

[Gelceea]

12:28 PM on 12/20/2011

No way. The fed is spending more than a trillion dollars a year than revenue received. We haven't even seen the beginning of this calamity.

[justwhendoesitend]

02:39 PM on 12/20/2011

You have to start employing more people at decent wages. This is just a brief uptick, anomaly in one sector. Folks are looking for positive news so hard things get blow out of portion if they find some. See if this turns into something a bit longer, great. But until the middle class jobs return well things will get worse as the middle class runs out of resources. Now once well off older generations because of losses in investments are slipping out of the middle class and losing homes.

[Beernuts]

12:45 AM on 12/21/2011

My favorite is "first-time unemployment filings drop (X)%" In the opposite world of economy of scale, isn't it possible to eventually have no one left who hasn't filed for unemployment?? I can see the headline now "Nowhere to go but up=unemployment reacheds 100%"

[rockinroll]

11:27 AM on 12/20/2011

Rental units are not a good sign. Almost everyone who owns a house that can't sell it is renting it out.
This mrtgage fiasco that the Banks caused has to be fixed so that people can get jobs (1 in 3 of US
jobs are housing related). Time to take over the Banks!

[Gelceea]

12:30 PM on 12/20/2011

FYI, the banks didn't cause it, federal regulation did. Private industry wants to succeed. Government interference, specifically Dodd and Frank, are responsible for the bubble and ensuing collapse.

[drkazmd65]

01:15 PM on 12/20/2011

You really should get out more. Federal Regulation (or the lack of it better put) was a contributing factor.

Greed, and short-sighted stupidity among the Banks, their bought & paid for pocket politicians, Mortgage Insurance companies/repackagers, and yes,... consumers alike was the driver of this fiasco.

Removal of the oversight & regulations just released the hounds.

[Jim bob]

02:01 PM on 12/20/2011

FYI, we'vealready seen that movie and it's kind of a hard sell. You should spend all your time trying to figure out how to do that.