U.S. Home Starts Top Forecasts, Permits Highest Since 2007

(Bloomberg) -- Construction of new U.S. homes increased more than forecast in November and permits to build climbed to a 12-year high as the housing-market strengthened amid low mortgage rates, solid job growth, and optimistic buyers and builders.

Residential starts rose 3.2% to a three-month high 1.37 million annualized rate after an upwardly revised 1.32 million pace in the prior month, according to government figures released Tuesday. Permits, a proxy for future construction, increased 1.4% to an annualized 1.48 million pace. Stocks and the dollar rose after the report and another that showed stronger-than-expected factory output in November.

Key Insights

• The data indicate residential construction may add to fourth- quarter growth after contributing in the previous quarter for the first time since the end of 2017. Demand has been fueled by mortgage rates near a three-year low as the job market remains resilient and wage gains help put money into the pockets of potential homebuyers.
• Construction of one-family homes rose to the highest since January, while permits for those dwellings increased to the highest level since July 2007.
• The positive reading corroborate other housing data. Homebuilder sentiment soared to a 20-year high in December. The latest consumer sentiment gauge from the University of Michigan also showed an index measuring home-buying conditions rose to a five-month high in December. Upcoming data this month are forecast to show existing-home sales, which comprise the vast majority of transactions, and new-home purchases were little changed in November.
• Groundbreakings for the multifamily category, which tends to be volatile and includes apartment buildings and condominiums, increased to a three-month high while permits also rose.

Get More

• The median forecast in a Bloomberg survey of economists called for starts to rise to a 1.35 million pace from a previously reported 1.31 million in October.
• Two of four regions posted a gain in starts, led by a jump in the South to the fastest pace since March 2007. Starts in the West also advanced.
• About 188,000 homes were authorized but not yet started, the most since February, indicating a growing backlog for homebuilders.
• The report, produced jointly by the U.S. Census Bureau and the Department of Housing and Urban Development, has a wide margin of error, with a 90% chance that the headline figure was between a 6.8% decline and a 13.2% increase.

--With assistance from Jordan Yadoo.

To contact the reporter on this story: Katia Dmitrieva in Washington at edmitrieva1@bloomberg.net

To contact the editors responsible for this story: Scott Lanman at slanman@bloomberg.net, Vince Golle

©2019 Bloomberg L.P.