Construction is picking up not just in apartments but in single-family homes, too, a sign that the economy is, indeed, steadily improving.
U.S. housing starts in November were at a seasonally adjusted annual rate of 1,173,000 — 10.5% above the revised October estimate of 1,062,000 and 16.5% above the November 2014 rate of 1,007,000 — the U.S. Commerce Department said Wednesday.
The surge nearly erased a 12% decline reported for October that was cited as one potential trouble point for the U.S. Federal Reserve raising interest rates.
Single-family housing starts, reflecting two-thirds of the market, reached a nearly eight-year high of 768,000 in November, 7.6% percent above the revised October figure of 714,000. The November rate for units in buildings with five units or more was 398,000.
The gains suggest home sales will remain steady, if not robust, over the next year despite the likelihood that the Fed will raise interest rates at its policy meeting Wednesday, according to the Wall Street Journal.
“There is a great deal of pent-up demand for housing,” PNC senior economist Gus Faucher said in a note to clients. “With steady job growth of around 200,000 per month, a falling unemployment rate, rising wages, very low mortgage rates, rising household formations, and better access to credit, demand for new homes is steadily improving.”
A sustained pickup in home construction would help boost the economy by creating construction jobs and demand for a host of goods, from wood paneling to sofas, the WSJ said.
Building permits were also on the rise in November, climbing 11% from October to an annual pace of 1.289 million, the Commerce Department said. They are up 13.4% this year compared with last.
“Robust building permits, combined with still reasonably elevated homebuilder optimism, provide a foundation for continued momentum in housing starts,” Kristin Reynolds, an IHS Global Insight economist, told the Christian Science Monitor. “We expect starts to reach a 1.3-million annualized rate in the second half of 2016 with single-family starts responsible for most of the gain.”