Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

U.S. housing starts rebound; single-family segment weak

Published 12/18/2018, 08:33 AM
Updated 12/18/2018, 08:35 AM
© Reuters. FILE PHOTO: Development and construction continues on a large scale housing project of over 600 homes in Oceanside, California

© Reuters. FILE PHOTO: Development and construction continues on a large scale housing project of over 600 homes in Oceanside, California

WASHINGTON (Reuters) - U.S. homebuilding rebounded in November, driven by a surge in multi-family housing projects, but construction of single-family homes fell to a 1-1/2-year low, pointing to deepening housing market weakness that could spill over to the broader economy.

Housing starts increased 3.2 percent to a seasonally adjusted annual rate of 1.256 million units last month, the Commerce Department said on Tuesday.

Data for October was revised down to show starts dropping to a rate of 1.217 million units instead of the previously reported pace of 1.228 million units. November's increase in homebuilding followed two straight monthly declines.

Building permits increased 5.0 percent to a rate of 1.328 million units in November, powered by a jump in the volatile multi-family housing sector.

Economists polled by Reuters had forecast housing starts slipping to a pace of 1.225 million units last month.

The housing market is being constrained by higher mortgage rates as well as land and labor shortages, which have led to tight inventories. While house price inflation has slowed, it continues to outpace wage growth, sidelining some first-time homebuyers.

Continued housing market weakness could be flagging a slowdown in the overall economy. Residential investment contracted in the first three quarters of this year, the longest stretch since mid-2009.

Homebuilding investment is expected to have declined again in the fourth quarter. Economists believe the soft patch will persist through the first half of 2019 as the sector continues to adjust to higher mortgage rates.

The 30-year fixed mortgage rate has increased more than 60 basis points this year to about 4.63 percent, according to data from mortgage finance agency Freddie Mac. With the Federal Reserve expected to raise interest rates on Wednesday for the fourth time this year, mortgage rates are likely to remain high.

Single-family homebuilding, which accounts for the largest share of the housing market, dropped 4.6 percent to a rate of 824,000 units in November, the lowest level since May 2017. It was the third straight monthly decline in single-family home building.

A survey on Monday showed confidence among single-family homebuilders dropped to more than a 2-1/2-year low in December, with builders reporting that "consumer demand exists, but customers are hesitating to make a purchase because of rising home costs."

Single-family starts in the South, which accounts for the bulk of homebuilding, jumped 6.8 percent last month. Single-family homebuilding tumbled 9.5 percent in the Northeast and plunged 24.4 percent in the West. Groundbreaking activity on single-family homes dropped 3.2 percent in the Midwest.

Permits to build single-family homes edged up 0.1 percent in November to a pace of 848,0000 units. These permits are now above the level of single-family starts, suggesting some pickup in homebuilding is likely in the months ahead.

Starts for the multi-family housing segment soared 22.4 percent to a rate of 432,000 units in November. Permits for the construction of multi-family homes rose 14.8 percent to a pace of 480,000 units.

© Reuters. FILE PHOTO: Development and construction continues on a large scale housing project of over 600 homes in Oceanside, California

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.