By MATT OTT, AP Business Writer
SILVER SPRING, Md. (AP) – New home construction in the United States rebounded 11.8% in November, as strong demand continued to boost builder confidence even as the slower winter season approached.
The double-digit percentage increase last month left homebuilding at a seasonally adjusted annual rate of 1.68 million units, an 8.3% increase from the rate at the same time in the year last, the Commerce Department reported Thursday. The number of residential constructions in October was slightly revised downwards to 1.5 million units against 1.52 million units.
Building permit applications, a barometer of future activity, rose 3.6% in November to 1.71 million units and are 0.9% above the November 2020 rate.
Single-family home and apartment construction was strong in November, with both posting small double-digit percentage increases from October. Despite the increase last month, starts of single-family homes are still down 0.8% from November of last year.
While the big jump in November after a somewhat sideways move in recent months suggests the housing market is still strong, economists are reluctant to give too much weight to volatile monthly housing starts data.
“It’s best to keep in mind that builders have more than enough work to keep them busy and interpret the ups and downs of the numbers as primarily noise and seasonal volatility,” said Stephen Stanley, economist. in chief of Amherst Pierpont.
Construction activity by region saw the biggest jump in the Northeast, which rose 27.5%, followed by a gain of 18.4% for the South. Construction in the West increased 5.1%, while activity in the Midwest declined 7.3%.
A monthly survey of builder sentiment released Wednesday by the National Association of Home Builders and Wells Fargo showed sentiment improved for the fourth month in a row, rising to 84 in December from 83 last month. The index hit a record high of 90 last November.
Demand for new homes remains strong, but finding workers, forecasting prices and shortages and supply chain delays still stumbles builders, the NAHB said. The lack of homes available for sale, new and old, has pushed prices to record highs.
NAHB Chief Economist Robert Dietz said that although single-family home starts in 2021 are expected to end the year 24% above pre-COVID levels in 2019, “we expect this that higher interest rates in 2022 hurt housing affordability. “
On Wednesday, the Federal Reserve said it would cut its monthly bond purchases – which aim to lower long-term rates – to double the pace it previously set. The Fed is trying to stamp out persistent inflation that has accelerated to a nearly four-decade high.
The Fed’s action could raise borrowing costs across the economy over the next few months, but policy changes don’t always immediately affect other borrowing rates. Even with three rate hikes next year, its benchmark rate would still be historically low, below 1%.
In its most recent report, the S&P CoreLogic Case-Shiller Home Price Index in 20 cities climbed 19.1% in September from a year earlier, with prices in all 20 cities setting new records.
The Commerce Department reported last month that the median price of a new home, the point where half of homes sold more and half as much, hit a record $ 407,700 in October, up nearly 18% compared to the previous year.
The rise in home prices over the past year has slowed a bit recently, but with limited supply and rates set to rise, it is not certain that more buyers will jump into the market.
“I don’t think the Fed’s announcement is going to result in a buying rush that has a significant impact on prices,” said Nancy Vanden Houten, chief US economist at Oxford Economics. “Long-term Treasury rates, which are key to determining mortgage rates, have actually been lower since the Fed’s announcement.”
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